In an environment where significant free cash flow generation, strong balance sheets, and superior management teams are crucial to company performance (and even survival), we believe our focus on high-quality enterprises with solid financials is more important than ever.
Strategic capital allocation is one of the most important activities management teams do based on our experience of nearly 50 years. We strive to invest in companies that, after paying business expenses, generate more cash than they need and in turn seek to increase shareholder value.
With excess free cash, leadership has five capital allocation choices.
1. Invest in the Business
2. Impact the Balance Sheet
3. Conduct Mergers and Acquisitions
4. Pay a Dividend
5. Buy Back Stock
Across Fenimore’s three mutual funds (FAM Funds), 100% of our holdings are employing one or more of these strategic tools. This bolsters our confidence in their leaders and business.