The annual public meeting for Fenimore Asset Management mutual fund shareholders was a microcosm of the economy, with investors voicing their concerns about the economy’s recovery and fund managers explaining their watch over companies’ debts, leading economic indicators and the credit markets.
The panel of FAM representatives at The Desmond on Tuesday morning discussed the importance of the government bailout in keeping the financial industry afloat but also spoke of the opportunity that presented itself in March, when stock prices slumped to 10-year lows because of the finance industry’s continuing problems.
FAM research analyst Eric Elbell said when the stock market bottomed out in March, the Cobleskill-based fund dove in and took advantage by buying stocks in the energy, financial and technology sectors at a discount.
“We dove in and everything was cheap,” Elbell said.
FAM Funds Chairman Tom Putnam said total net assets for the FAM Value Fund were $648 million as of Sept. 30. Share prices are up 18.1 percent for the year to date and 58 percent higher than their lowest point earlier this year but still down 7.6 percent for the past 12 months.
Cost-cutting measures by companies over the past year have driven earnings growth, but sales growth also seems to be on the way for companies as signs of the economy’s recovery are at hand, the fund managers said.
Paul Hogan, co-manager of the FAM Equity-Income Fund, said that across the board, economic indicators are getting better, citing consumer sales, which are rising after a long slide, and the index of leading economic indicators, which has been trending up for the past six months.
“If we’re not out [of the recession], we’re pretty close to it,” Hogan said.
“I think that is positive for sales growth.”
Total net assets for the FAM Equity-Income Fund were valued at $76 million as of Sept. 30, up 17.53 percent for the year to date but still down 8.9 percent for the past 12 months.
Taking questions from the crowd, managers explained how they read companies’ financial statements, set up mathematical models, talk to company management and interact with leaders before deciding on investments.
For instance, FAM managers went to China as part of evaluating Louisville-based Yum! Brands’ expansion into China, an area seen as a growth driver for the company.
The market outlook for 2010 is favorable as companies that are more efficient are focusing on generating cash and paying off debt, fund managers said.
As companies release third-quarter earnings this week, managers said they don’t know what exactly will happen but pointed out that many people are returning their investments to the market after pulling out last year.
Some investors remain cautious as they question whether the market’s huge bounce back is sustainable.
“At some point there will be a pull back [from investors] as earnings aren’t growing as fast as people want,” said John Fox, director of research and co-manager of the FAM Value Fund.
People who attended Tuesday’s shareholder meeting mostly found the meeting to be positive.
Wayne Raynsford of Voorheesville said the meeting showed how fund managers can be approachable. “It is something local — you can talk to a human being,” he said.
Cory Martin, who works for a local consulting company, said he attended Tuesday’s meeting to listen in on the discussion even though he isn’t vested in the fund.
“Having a meeting in this environment is tremendous,” Martin said.
Jacquelyn Schlappi of Voorheesville said she goes to the meetings every year as an investor in the FAM fund.
“It’s reassuring,” Schlappi said. “It gives confidence, which has been missing everywhere else.”
Categories: Business
