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Investor Update — June 2022

Written by Spiral Design on . Posted in Featured News & Insights, Investment Insights.

INVESTOR UPDATE — JUNE 2022

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    On Friday, June 10, the latest Consumer Price Index (CPI) showed inflation accelerated to a 40-year high in May, with the CPI increasing 8.6% year-over-year.1 This was an increase from April and halted any hope that the U.S. economy had reached “peak” inflation.

    Impact of Oil Prices

    One of the biggest contributors to surging inflation is the price of oil. At approximately $115, the price of a barrel of WTI oil is up 60% year-over-year and more than 20% since the start of the Russia-Ukraine War in late February.2 (WTI stands for West Texas Intermediate, which is a pricing benchmark commonly used for the oil industry.)

    The impact of rising oil prices is most evident to consumers at the gas pump. In the May CPI report, gas prices were up 49% year-over-year, representing roughly one-quarter of the total increase in the CPI!3 Of course, higher gas prices also drive up shipping costs and airfare.

  • William Preston, Portfolio Manager - FAM Dividend Focus Fund

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    William Preston, CFA
    Portfolio Manager,
    FAM Dividend Focus Fund

But transportation isn’t the only way higher oil prices reverberate throughout the economy. Oil has derivatives that are inputs for thousands of products ranging from plastic and packaging to clothing and medicine. This can lead to broad-based increased costs for consumers.

Impact of Inflation

Higher-than-expected and persistent inflation has forced the Federal Reserve (“the Fed”) to step-up how aggressively it fights inflation. The Fed combats inflation by raising interest rates in hopes of slowing consumer demand.

Last Wednesday (June 15), we saw this aggressiveness in action when the Fed announced its largest rate hike since 1994 (0.75 percentage points). While good for fighting long-term inflation expectations, in the short term, higher interest rates have led to lower stock valuation multiples and increased the probability of an economic recession and the potential for a reset in corporate earnings. This has pushed the market returns into bear market territory with the S&P 500 declining -24% since its all-time high on January 3, 2022.4

No one knows how much longer the bear market will last or if/when the U.S. economy will enter into a recession as a result of inflation and higher interest rates. What we do know is that recessions and bear markets do not go on forever and they have often presented us with opportunities to invest with better long-term return prospects.

Firsthand Research Gives Us Confidence

At Fenimore, we never try to avoid an economic slowdown. Instead, our research team spends its energy on finding and owning what we believe are quality companies that can weather economic turbulence and emerge from volatile periods even stronger. This includes businesses with strong, sustainable cash generation, sound balance sheets with little financial leverage, and capable management teams.

Over recent weeks, our research team has been busy on the road meeting with management teams face to face. It’s these in-person meetings — a longtime tenet of Fenimore’s research process — that help us gain a better understanding of the current macro challenges facing companies while reinforcing our confidence in our holdings’ abilities to persevere and potentially thrive during a variety of economic environments.

Looking Ahead

During these uncertain times, we’d like to reiterate what we stated in our May Investor Update. Our team tells you with certainty that we remain committed to Fenimore’s investment philosophy and principles that have successfully guided us through difficult times since 1974. We believe that our holdings will partake in future growth because their management teams are focused on shareholder interests and they possess strong financial footings to help them endure the current decline and prosper when the markets recover.

Stay Connected

If you have any questions about your investments, please connect with us at 800-721-5391, through our website’s contact us section, or via info@fenimoreasset.com. Our team also welcomes you to meet with us in either our Albany or Cobleskill location or virtually.

Thank you for your ongoing trust and we hope you have a safe and enjoyable summer.

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1 bls.gov

2 FactSet, as of 6/16/2022

3 bls.gov, as of 6/10/2022

4 FactSet, as of 6/16/2022

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Celebrating Shannon Almy

Written by Spiral Design on . Posted in All News, Company Hightlights, Featured News & Insights.

Celebrating Shannon Almy

We applaud Shannon for receiving the “Georgia Van Dyke Award” from the Schoharie County Chamber of Commerce! She was recognized for generously dedicating her time and talent to the chamber and community over many years. It is no surprise to her Fenimore teammates that Shannon’s strong personal character was also a factor that the judges considered.

Congratulations Shannon!

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Hunter Frayne

Fenimore Asset Management Hires Hunter Frayne

Written by Spiral Design on . Posted in All News, Company Hightlights.

Fenimore Asset Management Hires Hunter Frayne

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    Fenimore Asset Management, an independent, Capital Region-based investment management firm and manager of the FAM Funds family of mutual funds, has hired Hunter Frayne as an Investment Research Associate for its expanding team.

    Mr. Frayne conducts firsthand, in-depth, company research adhering to Fenimore’s distinctive, time-tested investment approach. He graduated with honors from the University of Connecticut with a double major in Economics and Philosophy. While attending UConn, Mr. Frayne interned at Pitch Gauge, IBM, Gutenberg Research, and The Hanover Insurance Group.

    “We are very pleased to have Hunter on our team,” said Fenimore CEO John Fox. “His talent, character, and dedication to our investment process should benefit our investors for many years.”

  • Hunter Frayne

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Founded in 1974, Fenimore Asset Management is an independent, nationally recognized investment manager with more than $4.2 billion in assets under management (as of March 31, 2022) through its Cobleskill and Albany offices. Fenimore offers both individually managed portfolios and a family of mutual funds (FAM Funds) that can be used for retirement and other long-term investment planning. The firm’s team of professionals prides itself on investing in carefully selected quality businesses and providing its investors with highly personalized investment services.

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Joe LeRoy

Joe LeRoy Joins Fenimore Asset Management

Written by Spiral Design on . Posted in All News, Company Hightlights, Featured News & Insights.

Joe LeRoy Joins Fenimore Asset Management

Joe LeRoy, CFP®, has joined Fenimore Asset Management’s growing team as an Investor Relations professional. Fenimore is an independent, Capital Region-based investment management firm and manager of the FAM Funds family of mutual funds.

Mr. LeRoy works alongside investors sharing Fenimore’s distinctive and understandable investment approach and helping them achieve their long-term financial goals. Previously, he was Vice President of Workplace Solutions at Goldman Sachs Ayco Personal Financial Management leading business development for financial wellness services to Fortune 500 clients. Mr. LeRoy has more than 18 years of financial services experience, holds the CFP® (CERTIFIED FINANCIAL PLANNERTM) designation, and earned his bachelor’s degree in Economics and Government from Saint Lawrence University.

“Joe’s knowledge, experience, and commitment to service and building relationships will benefit our investors,” said Liza Baran, Director of Shareholder Services. “He is an excellent and valued addition to our team.”

Founded in 1974, Fenimore Asset Management is an independent, nationally recognized investment manager with more than $4.2 billion in assets under management (as of March 31, 2022) through its Cobleskill and Albany offices. Fenimore offers both individually managed portfolios and a family of mutual funds (FAM Funds) that can be used for retirement and other long-term investment planning. The firm’s team focuses on investing in carefully selected quality businesses and providing its investors with highly personalized investment services.

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Helios Care

Helios Care Community Project

Written by Spiral Design on . Posted in All News, Fenimore in the Community.

HELIOS CARE COMMUNITY PROJECT

At Helios Care, employees and volunteers work towards “Making Life Easier for patients and families facing serious illness or end of life by providing choices, dignity and compassionate care.”

Earlier this month, Fenimore associates worked together in hopes of making life a little easier for the employees and volunteers who travel every day and provide care for Helios Care patients.

Our associates assembled and delivered 150 gift bags filled with portable phone chargers and gifts cards in hopes of making their travels a little easier. Thank you to everyone at Helios Care for your hard work and dedication to Helios Care and our community. We sincerely hope those tokens of appreciation helped to make a small difference in your day.

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Women In Business

Women in Finance – Thank you to the Albany Business Review

Written by Spiral Design on . Posted in All News.

Women in Finance – Thank you to the Albany Business Review

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    WOMEN IN FINANCE: Thank you to the Albany Business Review for highlighting Deb Pollard, Anne Putnam and Liza Baran from our leadership team as they share their lessons in leadership, what drew them to the finance industry and their advice for others who want to set off in a similar direction.

    When asked about the most important leadership lesson she has learned, Fenimore’s President, Deb Pollard, replied:

    “The most important leadership lesson that I have learned is that you can’t run a company on your own. You have to surround yourself with great people, give them room to try new things, and let them know that they are appreciated for not only the big accomplishments, but for the little things too. Always try to hire the absolute best talent you can find. It’s all about the people!”

  • Women In Business

    Women in Business

    Photo credit: Paige McCarthy Photography

Anne Putnam, Senior Vice President, reflected on why she works in finance and what drew her to this industry:

“Growing up in this family business set the stage for my career progression. From the dining room table on weekends to family trips, I saw firsthand my parents cultivate the investor when out of the office plus associates within. These experiences enhanced my childhood as they would include me. Once I matriculated to graduate school, the “aha” moment in Finance class set me on the path to eventually come home and assist our firm’s growth and succession.”

Liza Baran, Director, FAM Funds Shareholder Services, shares her advice for others who want to set off in a similar direction:

“It is important to always focus on the quality of your work, maintain a positive attitude, and take initiative. Building relationships and learning from senior members of the team will pay dividends over time. Keep a learning mindset and pursue education in your field whether that’s an advanced degree, an industry license, taking a class, or reading a book. As you advance, be the mentor you wish you had and pay it forward!”

Whether it is surrounding yourself with great people, continual learning, or building relationships along the way, our ‘Women in Finance’ leaders are happy to share their insights to encourage and support the leaders of tomorrow.

Photo credit: Paige McCarthy Photography

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Regional Food Bank

Food For Thought

Written by Spiral Design on . Posted in All News, Community Spotlight, Fenimore in the Community.

FOOD FOR THOUGHT

The Regional Food Bank of Northeastern New York distributed more than 51 million pounds of food and grocery products in 2021 — the equivalent of 42 million meals — across 23 counties! The need is great … and growing.

The Regional Food Bank is responding to the surge in demand for their services due to rising grocery and fuel costs, while also handling supply chain issues and rising operational costs. Their mission “is to alleviate hunger and prevent food waste.”

In mid-March, our associates helped Regional Food Bank partner agencies load their food orders. It was a very enjoyable and meaningful morning!

  • Regional Food Bank

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  • Fenimore Team Voluneers

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  • Fenimore Team Member

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Research on The Road: Face-to-Face Meetings

Written by Spiral Design on . Posted in All News, Featured News & Insights, Insights, Investment Insights.

RESEARCH ON THE ROAD: FACE-TO-FACE MEETINGS

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    By John Fox, CFA®
    CEO

    After two years of limited travel, Fenimore’s investment research analysts are back in full swing meeting with management teams in person at their headquarters, conferences, and industry events. During the last month, we met with a couple dozen companies. While there are certainly challenges, executives are not pessimistic.

    Insights from Our Travels

    • Banks: Banks seem encouraged by the financial strength of their customers and the expected increases in short-term rates by the Federal Reserve. Banks expect they’ll be able to increase net interest margins — the difference between interest paid and received — as a result.
  • Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

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  • Insurers: Insurance premium rates continue to increase which is good for the profits of our insurance holdings. With increasing inflation and a war in Europe, it is widely appreciated that it is a risky world which increases demand for insurance.

  • HVAC Companies: The industry is undergoing regulatory changes over the next three years that will lead to significant redesigns of product lines. This will be an enormous engineering challenge, but historically this has led to higher prices on AC units as well as higher profits. We believe this should be a tailwind while customers should receive increased energy savings due to technological advancements.

  • Software Firms: We met with a handful of software companies that sell to financial institutions. The outlook for the year continues to be mid to high single-digit growth in revenue and we are confident in the ability of our holdings’ leaders to navigate current challenges.

  • Earnings Growth: It is clear that the global supply chain problems and elevated transportation prices will be with us the rest of the year. At this point, we continue to expect companies to grow earnings over 2021 levels, but at a slower rate than we anticipated at the beginning of the year. We also expect our holdings to generate cash profits to invest in growth and return to shareholders through stock buybacks and increased dividends. A skilled management team is often crucial to a good investment experience.

Fenimore’s firsthand, in-depth research helps us know our holdings well and this gives us confidence as we seek to protect and grow your capital over the long term. We hope our research insights from these face-to-face meetings give you assurance too.

Please call us at 800-721-5391 if we can assist you. Thank you for your ongoing trust.

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