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FAM Funds’ 36th Annual Shareholder Meeting

FAM Funds’ 36th Annual Shareholder Meeting

FIRSTHAND RESEARCH
GIVES US CONFIDENCE

Please join us! Our investment research team will share insights from their company visits and meetings with management.

New Location. New Format.
Same Investment Philosophy.

Tuesday, October 11, 2022
4:00–5:00 p.m.
SUNY Cobleskill – Bouck Hall
Refreshments | Complimentary Gift

Please provide your name and email address when you RSVP

  • A SUNY Cobleskill map will be emailed to all attendees

RSVP

or call 518-234-7462
  • In-Depth Research: Learn how Fenimore’s fieldwork reinforces our confidence in our holdings’ abilities to persevere and potentially thrive during turbulent times.
  • Personalized Service: Hear about various shareholder service initiatives and what they mean to you.
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FAM Funds 36th Annual Meeting


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27 Years & Running

27 Years & Running

An Interview with FAM 5k Team Captain, Keith Cataldo

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    Since 1994, Fenimore Asset Management has held its annual FAM 5K “Fund” Run/Walk each September (except during COVID-19). Preparations for this year’s race on September 24th are already in full swing and we caught up with Keith Cataldo, Director of Trading and Operations at Fenimore and the FAM 5k Team Captain to learn more about why he became the organizer of this race what that means to him.

    1. HOW DID YOU BECOME THE FAM 5K TEAM CAPTAIN?

      I was just lucky, I guess! 

      I am the 3rd member of the Fenimore Family to take over the reigns as Race Director.   I had some big sneakers to fill following our previous two directors (George Chelius & Peter Sweetser).

      Six years ago, I started to assist Peter with some of the race coordination.  Once you understand the impact the race has had and will continue to have on the charities and our community, who wouldn’t want to be part of that? 

      It’s a lot of work but an honor to be associated with the race.

  • Keith Cataldo

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  1. AFTER A 2-YEAR HIATUS, THE FAM 5K IS BACK WITH YOU LEADING THE WAY. WHAT IS ONE WORD YOU WOULD USE TO DESCRIBE BEING ABLE TO CONDUCT THIS RACE AGAIN IN OUR COMMUNITY?

    Opportunity!

    During the pandemic when we were unable to host the FAM5k, Fenimore continued to support these organizations behind the scenes.   However, the race is what provides the “Opportunity” to bring attention to five outstanding organizations.  Organizations that make the lives of people better; that make our community better.  


  1. BY DAY, YOU ARE FENIMORE’S DIRECTOR OF TRADING.  EVERY YEAR AROUND THIS TIME YOU TRANSFORM INTO OUR FAM 5K TEAM CAPTAIN – 2 VERY DIFFERENT ROLES. ARE THERE ANY SIMILARITIES?

    I think that both roles require someone that can be comfortable with making decisions.

    As the Director of Trading my job is to try get all our clients the best possible entry or exit price on an investment.  I must decide when to buy or sell a security to ensure that I put our client’s best interest first.   I may not always be right, but I will have a reason for making that decision at that time.

    It’s the same with my role as race director.  I look at all the information and make a decision that I believe is in the best interest of the race that year.  It’s impossible to always be right, but you need to be comfortable with your decision and able to learn from any mistakes.


  1. WHAT IS ONE BEHIND THE SCENES DETAIL OF ORGANIZING A COMMUNITY 5K THAT PEOPLE WOULD BE SURPRISED TO KNOW?

    People are usually surprised when I tell them that I begin my preparation for the September FAM5K at the end of January.   I have built a spreadsheet to help keep me and the race timeline on track.  The first order of business is always to sign a contract securing the Cobleskill Fairgrounds (where the race is hosted), followed by contacting the board for that year’s charity race recipient. 

    I have over 80 separate checkbox items on my sheet that range from ordering T-Shirts to testing walkie-talkies.

    There are two certainties as race director:

    • You can never be too prepared.
    • You will always forget something.

  1. WHAT’S EASIER TO YOU – RUNNING A 5K OR ORGANIZING A 5K?

    I don’t by any measure consider myself to be a runner.   But running a 5K would be much easier than organizing one.  The FAM5K is also considered a “Run/Walk”.  I wouldn’t be setting any new course records (Male: 14:26 & Female: 16:06), but I know I would have a lot of fun competing with family and friends.    


  1. WHAT IS YOUR FAVORITE PART OF RACE DAY?

    Is it bad to say when it’s over?  In the immortal words of John “Hannibal” Smith from my favorite 80’s Television show The A-Team:

    “I love it when a plan comes together”


    Join Keith and Fenimore on September 24th to walk/run and support our mission of endorsing and promoting the qualities of family, health, and service to our community.

    Learn more and register here: http://www.fam5k.com/

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    4 Things To Consider Before You Invest

    4 Things To Consider Before You Invest

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      We live in an ever-changing, global investment landscape … and yet, the stock market and U.S. economy seem to go through the same cycles over and over. With each era, new investment trends surface. Often complicated and difficult for investors to understand, these “latest and greatest” investment offerings tend to fade away. Plus, no matter which way you turn, you’ll likely find an “expert” enticing you to try to time the market or chase performance. The noise can be overwhelming.

      What Can You Do?

      Tune out the noise and focus on what matters — you and your long-term financial goals. Before you hire an investment manager, make sure you consider and understand their “Four Ps” giving equal weight to each.

      1. People: Call or visit the firm’s office. Get a feel for their culture and be sure to ask how long the portfolio managers have worked there — longevity can be a good sign.
      2. Philosophy: Can the investment managers clearly explain their philosophy within one minute?
      3. Process: Make sure their investment process is detailed, yet straightforward and understandable.
      4. Performance: Unfortunately, many investors look at performance as the most important factor. Past performance is no guarantee of future results so it’s crucial to evaluate all Four Ps equally.
    • 4 things to consider

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    The Value of a Long-Term View

    The Value of a Long-Term View

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      Imagine someone ringing your doorbell every minute from 9:30 a.m. until 4:00 p.m., Monday through Friday, to tell you a price they would pay for your house even though it was not for sale. Would you sell?

      Would you sell if each time you opened the door they offered you less and less? Obviously not — that would be irrational because you know the true value of your house. The same applies to stocks of quality companies — they have value despite their daily price movements.

    • The Value of a Long-Term View

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    Economic Worth of A Business

    However, investors often perceive “value” in the stock market as “price” and forget the economic worth of the business attached to the stock. During selloffs, markets can drop because of uncontrollable factors that are not purely economic in nature,  despite sound company-level fundamentals. Many perceive this day-to-day volatility as “risk,” but you certainly wouldn’t consider daily price movements as risk to your home’s long-term value. Perhaps the long-term view that real estate investors often take could be a good lesson for stock investors.

    Similar to your home, companies have actual economic value despite their stock price on any given day. They are not just pieces of paper or a blip on the computer screen. We favor quality U.S. businesses and, ultimately, a stock’s performance depends upon the underlying company’s ability to grow economically — not how the market prices its stock on a daily basis.

    Time in the Market, Not Market Timing

    Investors often let their emotions get in the way of rational decision making. They become fearful and sell when they should buy. The typical result is that they miss the market upswings and their gains are much less than what they would have been if they had just stayed the course. Trying to time the market just does not work consistently enough to build wealth over the long term.

    Additionally, there is an overwhelming amount of research that shows that long-term investing — even through a stock market downturn — yields better results over the years than trying to time a decline, remove capital, and return when “things are better.” In fact, studies of 20-year periods demonstrate that missing just 10 of the best days in the stock market over two decades can dramatically affect an investor’s rate of return.

    Maintain A Long-Term View

    Solid, fundamental business characteristics do not make a stock impervious to daily price movements, and all asset classes fluctuate including bonds and real estate. However, just as your home’s value can grow over time, stocks of quality, financially sound companies also possess long-term growth potential. We believe that stocks are essential in order to outpace inflation and generate real wealth over the long haul.

    If you focus on your long-term financial goals and not short-term stock market fluctuations, you can be successful. So as stock market volatility causes people to be fearful, try to focus on quality businesses that can help defend against what we believe is true risk – the permanent loss of capital.

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    Stick to the Basics

    Stick to the Basics

    Sticking to the basics can help you achieve your long-term financial goals.

    Save Your Money First

    In the ideal world, we tell our investors to have at least six months, and as much as two years, of living expenses set aside before they invest in the stock market. Although many Americans may not be there yet, it is a good goal. Having a sufficient emergency fund ― in good times and bad ― should provide flexibility and allow you to make rational, unforced financial decisions.

    Borrow as Little as Possible

    Virtually everyone has a loan with the largest typically being their mortgage. It’s wonderful to realize the American dream, but paying off your debts as soon as possible can help improve your financial footing.

    Over the years, our investment research team has found that the companies that survive economic downturns are often the ones with little or no debt and plenty of cash. This holds true for individuals and their households as well.

    Invest in Your Future

    Invest your hard-earned money carefully, focusing on a long-term horizon. Choose investments that you understand and feel comfortable owning. You may want to read our short article, “4 Things To Consider Before You Invest.”

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    Investor Update — June 2022

    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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    Investor Update — May 2022

    Investor Update — May 2022

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      As we came into the new year, the consensus was that the U.S. economy and earnings of American companies would grow. Perhaps at a slower rate than 2021’s pace, but still grow. It was also well understood that the Federal Reserve (“the Fed”) would be reducing the stimulus put in place at the pandemic’s onset, meaning they would increase short-term interest rates to cool off the rate of inflation.

      As 2022 is unfolding, two events have increased the rate of inflation and forced the Fed to act quicker and, perhaps, with more intensity than previously expected.

      1. Russia’s invasion of Ukraine has put upward pressure on energy and food costs. Russia is one of the largest producers of oil in the world and a large share of the world’s wheat supply comes from the Russia/Ukraine region. The inflation report released this morning (5/11/2022) shows significant year-over-year increases in both energy and food costs.
      2. China’s zero-COVID policy is resulting in factory and port closures there. As China is a major exporter of parts and finished products, these closures are causing American businesses to scramble to obtain products they need. In many cases, they are paying significant premiums for airfreight or other logistics options. To cover these transportation costs, domestic companies may pass them on to their customers in the form of higher prices.
    • CEO John Fox, CFA

      CEO John Fox, CFA


      “I want to contrast this with Fenimore’s holdings which, in our opinion, are competitively advantaged firms with significant cash profits and reasonable levels of debt. No matter what happens in the economy or markets, financially strong companies can weather the storm.”
      John Fox, CEO

    One of the potential outcomes of higher interest rates and energy costs is that they slow the economy so much that we experience a recession.

    You have heard us say that stock prices follow earnings and, in a recession, it is normal for company profits to decline. The stock market is trying to figure out if we will have a recession and, if so, when. Of course, no one knows the answer and this is creating volatility in stock prices. The one thing we do know about recessions is that they end and a new cycle of growth begins.

    Corporate Profits

    An interesting aspect of the current “recession watch” is how strong corporate profits are today. Our Investment Research team recently finished digesting a couple hundred earnings reports for the quarter ended March 31, 2022. Earnings continue to grow and, in some cases, companies have reported record results. In cases where earnings are down, it is usually due to temporary factors like elevated transportation costs. We don’t know if there will be an overall decline in earnings at some point, but we are watching results carefully.

    Additionally, our analysts continue to travel and meet with our holdings’ management teams — we just visited two in Dallas and Richmond — to ensure that we have our finger on the pulse of their operations.

    • A noteworthy point: Some of the largest declines in the stock market this year are from speculative companies that may not be profitable, generate cash flow, or have an established business model. I want to contrast this with Fenimore’s holdings which, in our opinion, are competitively advantaged firms with significant cash profits and reasonable levels of debt. No matter what happens in the economy or markets, financially strong companies can weather the storm.
    Looking Ahead

    During these uncertain times, we can tell you with certainty that we remain committed to Fenimore’s investment philosophy and tenets that have successfully guided us through difficult times in the past. 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.

    We’re Here for You

    Please contact us with any questions or concerns 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.

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    Letter From Cobleskill: Spring 2022

    Letter From Cobleskill: Spring 2022

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      Dear Fellow Shareholder,

      As I write this, our thoughts and hearts are with the people of Ukraine. May our world leaders soon find a path to peace.

      After a terrific 2021, the stock market has dropped 10% to 20%, depending on the index, since the beginning of 2022.1 The war in Ukraine has certainly played a role, but that is not the only reason in our view. As we entered the year, stock valuations were stretched and this left stock prices at an all-time high and susceptible to decline. Additionally, the inflation that began gripping our nation late last year has proven to be more firmly entrenched than originally believed.

      Inflation has led to decreased consumer spending as higher prices on essentials like energy and groceries are forcing many people to cut back on discretionary spending (such as vacations and entertainment). As the first quarter ended, the Federal Reserve was beginning the gradual and delicate balancing act of trying to raise interest rates enough to further slow spending — and inflation — but not so much as to trigger a recession.

    • Letter From Cobleskill spring 2022

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    As long-term investors, it is always helpful to remember that stock market downturns are part of the experience. I have been at Fenimore for 26 years and in every one of those years but one, the market had a decline of 5% or more at least once during the year. This is a normal part of stock investing and, while some uncertainty lies ahead, we see no reason for panic.

    First, the current downturn started when our economy was in a position of great strength with consumer spending and corporate earnings at record highs. This is helping to cushion the fall. In addition, interest rates, while rising, are still low by historical standards.

    At the same time, what reassures us the most about the days ahead is what our research analysts are hearing directly from the individual companies in which we invest. In recent months, we have met with dozens of businesses to discuss the health of their operations and their roadmaps to growth. While there are certainly challenges (global supply chain problems and elevated transportation prices will be with us the rest of the year), these executives are far from pessimistic.

    They intend to grow, reinvest, make acquisitions, and return profits to shareholders in the form of stock buybacks and increased dividends — maybe not to the degree we thought possible three months ago, but certainly at what we consider healthy levels. Overall, these leaders reported that order backlogs are robust, business remains good, and profit margins, while down, are still expected to allow for growth-related activities. We are confident in the collection of businesses in our funds.

    Fenimore continues to invest toward a return to “normal.” This means focusing on quality companies that meet our rigorous standards and have the ability, in our opinion, to weather the challenging times and excel when the environment is better. We have made slight adjustments in the funds with an eye on strengthening positions in well-managed, reasonably-priced businesses that may be experiencing short-term pressures, but that we believe should be stronger three years from now. Similarly, we reduced our stakes in companies whose prices peaked in our view and whose long-term prospects are not as favorable.

    A DECADE OF DILIGENT MANAGEMENT

    Fenimore is proud to celebrate the 10-year anniversary of our FAM Small Cap Fund (FAMFX). Our team is pleased with the performance we delivered for shareholders over that time while seeking to mitigate risk. Under the direction of Portfolio Managers Andrew Boord and Kevin Gioia, we pursue quality, solidly profitable, and sustainable small-cap companies with long-term growth potential. Congratulations to Andrew and Kevin and the entire investment research team! We also thank everyone who is invested in FAMFX and look forward to the next decade.

    LET’S CONNECT

    We value our personal connections with shareholders. You can reach us with any questions at 800-932-3271, 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.

    Sincerely,
    John D. Fox, CFA
    CHIEF EXECUTIVE OFFICER

    ——

    1 FactSet, as of 3/18/2022

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    Spring Cleaning your Finances? 3 Quick Tips

    Spring Cleaning your Finances? 3 Quick Tips

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      Includes tips to assist you in getting started on your path to achieve your financial goals, reminders on upcoming deadlines and the importance of keeping your accounts up-to-date:

      01 THE POWER OF NOW

      One of the most common things we hear from investors — of all ages — is that they wish they started saving earlier. There is often a sense of regret about not participating in positive returns when the stock markets are performing well. Conversely, no one has ever complained to us about saving too early. In our experience, if you have the money, the best time to start saving is today. It is never too late or too early to invest.

    • hello spring

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    Long-Term Compounding Can Be Meaningful
    It’s the “rolling snowball” effect. Put simply, compounding pays you earnings on your reinvested earnings. The longer your money works for you, the more exciting the numbers can become. Fenimore’s Investor Relations teams are available to help you prioritize your long-term financial goals and fine-tune your investment strategy.

    Whether you are starting your first job, preparing for a child’s college expenses, or planning for retirement, we’re here to help.

    02 THERE’S STILL TIME — MAKE YOUR 2021 IRA CONTRIBUTION

    Investors have until the tax filing deadline of April 15, 2022, to make a 2021 Individual Retirement Account (IRA) contribution. IRAs are one of the most powerful retirement savings tools available. An IRA is a personal savings plan that offers specific tax benefits.

    • Even if you’re contributing to a 401(k) or other plan at work, you might also consider investing in an IRA.
    • The two major types of IRAs are Traditional and Roth.
    • Practically anyone with taxable compensation can open and contribute to a Traditional IRA.
    • Both Traditional and Roth IRAs feature tax sheltered growth of earnings.

    However, there are important differences between these two IRAs with respect to eligibility and taxation.

    03 REVIEW YOUR ACCOUNT BENEFICIARIES

    Did you know that your beneficiary designations supersede what is written in any legal document such as a trust or will? Therefore, we recommend that you review, and update as necessary, both your primary and contingent account beneficiaries annually. If your situation has changed, there may be unintended consequences from your beneficiary designations.

    Questions? To speak with a Fenimore associate about your investing goals, call us at (800) 721-5391 or stop by the Cobleskill or Albany, NY offices.

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    Research on The Road: Face-to-Face Meetings

    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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    Thomas O. Putnam founded Fenimore in 1974 with two passions: conduct in-depth, firsthand, independent investment research and serve investors with excellence and integrity. Today Fenimore Asset Management, manager of the FAM Funds, is nationally recognized, yet locally rooted and independently owned. Decades have passed, but our approach endures.

    Securities offered through Fenimore Securities, Inc. Member FINRA/SIPC,
    and advisory services offered through Fenimore Asset Management, Inc.

    © Fenimore Asset Management. All Rights Reserved.