Page 15 - DIY Investor Magazine - Issue 25

Irrespective of individual company approaches, one factor has been the same: they all have high-quality and experienced management teams at the helm.
In many cases, they made decisions quickly and decisively. These ranged from the implementation of furlough arrangements to timely decisions around working from home. Such leadership should mean these companies are well placed as we slowly emerge from the crisis.
RELATIONSHIPS MATTER
Brand strength and robust long-term customer relationships have helped businesses adapt. Many food producers enjoyed deeply engrained relationships with supermarkets prior to the Covid-19 outbreak. Communication lines were strong, meaning many were able to quickly adjust to ensure the food supply chain remained intact and shelves well stocked as the crisis unfolded.
So, while the pandemic has been tragic, it has served to strengthen and further embed many relationships across the corporate world. The economy’s long-term recovery will be built of these very relationships.
The recovery will be more about the High Street than Wall Street
Stock markets have recovered strongly from the mid-March slump. However, we believe many businesses have yet to feel the full economic pain of lock down
As furlough schemes unwind and unemployment levels inevitably increase, consumer confidence will dip and disposable incomes will suffer. There will be follow-on impacts from weak high streets and city centres.
Retailers, restaurants and property companies will likely bear the brunt of this pain. The acceleration of the shift to online will also create further challenges for some sectors.
Nonetheless, we have been pleased at how nimble and adaptable many small-cap businesses have been. Such firms are usually the first casualties when investors panic.
However, as we have shown, high-quality growth businesses have traded well throughout the crisis. These are precisely the types of companies in which we invest. We will continue to do so as we navigate through an uncertain world.
15 DIY Investor Magazine | Sept 2020