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Dear Fellow Investor,

A sense of stability has returned to the investment world as it appears that inflation is abating and the economy is growing slowly. Our team views stability with optimism and the stock market, which is forward-looking, has responded accordingly. The S&P 500 Index hit a new high in January after more than two years since its previous high.1

How did we get to where we are today? Late in 2021, inflation began to accelerate. When it became clear that high inflation was not temporary, the Federal Reserve (“Fed”) intervened. The Fed increased short-term interest rates significantly — at a record pace of just 18 months. Interest rates are a key factor in valuing assets, so this sudden change caused the prices of stocks, bonds, and real estate to decline.

Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

Given this backdrop, why are stocks currently performing well overall? It seems that the market is now expecting the Fed to cut short-term interest rates due to inflation stabilizing. No one knows what the Fed will do, but we believe that steady interest rates (no more increases) are a positive for asset prices across the spectrum. Additionally, corporate earnings are projected to achieve mid- to high-single-digit growth this year. This adds to the optimism because stock prices tend to follow earnings growth over time.

Even with the volatility and uncertainty over the past two years, you may be pleasantly surprised to know that the stock market has generated good returns over one, three, five, and 10 years as of year-end 2023.2 Likewise, we hope you are pleased when you review your FAM Funds quarterly statement.

Just as Fenimore Asset Management’s stock selection process has been steadfast over the last half-century despite an ever-changing investment landscape, so has our mantra — focus on the long term. As we celebrate our golden anniversary, our research analysts remain dedicated to identifying select, quality businesses that we believe can grow and produce attractive returns over time.

We evaluate these companies carefully through personal meetings with leadership, facility tours, and extensive research. Our approval criteria are unyielding: small to midsize firms with business models we understand and clear competitive advantages; strong balance sheets, free cash flow generation, and increasing cash profits; experienced and ethical management; and the potential to deliver long-term, sustainable growth for our investors.

Developing an in-depth understanding of companies, including their economic worth, allows us to welcome market volatility rather than fear it. Sometimes, that means moving on to what we think are better opportunities. Other times, it means buying more shares in the face of market panic. Fenimore prepares for markets and does not predict them. We believe that having a long-term perspective, knowing what you own, and investing in quality, well-run businesses is the best way to outpace inflation and grow wealth over the long haul.

While matters seem to have stabilized and our team is positive about the future, many outcomes are still possible. As a result, we will continue to stick to our market-tested approach and identify what we deem to be the best companies, buy shares in them if they are available at reasonable prices, and hold them for many years as they increase earnings. If we execute our process well, then we expect healthy returns over time — regardless of the temporary macro conditions experienced along the way.

On March 6, Fenimore moved into our new Albany branch office with the goal of ensuring that the investor experience and work environment are the same as our Cobleskill headquarters. Located at 142 Wolf Road, the new location is more than double the size of our previous Albany office. This larger space accommodates multiple operating groups to better serve you. We welcome you to visit us or schedule an appointment.

Please do not hesitate to connect with us about your investments and financial goals in our Cobleskill or Albany office, or from the comfort of your own home. Call 800.932.3271 or email us at

Thank you for your confidence in us.

John D. Fox, CFA®



1 FactSet as of 1/19/2024
2 FactSet as of 12/31/2023