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Dear Fellow Shareholder,

As we head into the second quarter of 2023, the investment conversation in the news media and on Wall Street continues to fixate on the following questions:

How high are interest rates going to rise? What did the Federal Reserve say today? Are we entering a recession? Are we already in one? When will inflation recede? How long is this all going to last?

Additionally, questions are now swirling regarding the two banks that collapsed and the banking industry.

We hope the email our team sent to you in mid-March on this topic was helpful. The main points we stressed were how we personally know our bank holdings and how confident we are in them.

Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

Legendary investor Warren Buffett once said, “What you really want to do in investments is figure out what’s important and knowable. If it’s unimportant or unknowable, you forget about it.”

Interest rates, inflation, and other economic and stock market influencers are certainly important, but they are “unknowable” because they are unpredictable and beyond our control. At Fenimore, we study them and keep them in our peripheral vision, but our focus is on what we know — the strengths, weaknesses, opportunities, and threats of the businesses we invest in on your behalf.

Instead of prognostication, our time is much better spent striving to ensure that your, and our, money is invested in what we believe are quality companies. These enterprises should be built to weather these turbulent times, and potentially become stronger, while emerging from the clouds poised for sustained growth and attractive returns.

How do we know our businesses? By meeting regularly with their leadership teams, visiting their facilities, talking to their customers and competitors, analyzing their financials, and building a deep knowledge in the industries in which they compete. From Fenimore’s perspective, the most valuable information we garner for assessing the quality characteristics and long-term prospects of our holdings comes from our sessions with management.

Here’s a notable example. In March, our research analysts participated in a virtual meeting with an insurance holding. They impressed us with their presentation on how they use data collected from cell phones to learn about people’s driving behavior and then use that data to price insurance appropriately. We came away saying, “Wow! This company is so far ahead of their competition when it comes to data and insights, and we believe it’s so well-run, that we will continue to hold their stock for the long term.” Without a doubt, the 90 minutes we spent with their leadership was much more valuable than spending 90 minutes trying to guess whether inflation will go up or down.

From a macro standpoint, we are closely watching the impacts of higher interest rates on certain sectors of the economy, such as banking and housing, and applying greater scrutiny to our holdings in those areas.

For instance, we’re extremely impressed with the steps taken by one of our holdings in the home fixtures and building materials industry to prepare for and adapt to the slowdown in demand. We’re confident in their long-term prospects and see them as a quality holding.

Overall, insurance, industrial, technology, and travel businesses are doing well. Our research analysts are looking for opportunities to increase our presence in these industries if the right companies and prices present themselves.

We will stick to our playbook and focus most of our time on what is important and knowable — the businesses behind your investments. Fenimore’s team will continue to hit the road and conduct firsthand research. From the beginning of January through March, our analysts have already had 22 face-to-face meetings with both existing and prospective holdings as well as four virtual discussions.

Our associates are working diligently as we strive to protect and grow your capital by investing in what we consider to be quality companies that can expand and produce attractive returns over time. Please visit us in either our Cobleskill or Albany office, call 800-932-3271 or email us at if you have questions or would like to talk about your investments. Thank you for your trust and friendship.

John D. Fox, CFA