We are very pleased to have kept pace with the Q1 surge in the Russell 2000® Value Index despite not holding any of the direct reopening plays such as airlines, hotels, and restaurant stocks. In the strange world in which we now reside, this is the third quarter out of the last four where our return has exceeded 20% (in the other we only approached 10%). Rest assured our risk discipline remains in place as we continue to focus on companies that can generate positive cash flows, even in difficult economic environments. The portfolio remains balanced between cyclical companies which should benefit from a strong economy, and companies we expect will do well in a less robust environment.

One by-product from our strategy of buying companies that are depressed enough to have management initiate a buyback is that they are occasionally controversial enough to attract a large short interest. This gave us a temporary boost when a few of our holdings were carried upward on the periphery of the GameStop mania. One short-seller favorite which advanced sharply was a licensor of an ingredient used in the treatment of hospitalized COVID-19 patients. We took advantage of this move to liquidate our position after witnessing significant insider selling. The normally stable purveyor of Green Giant brand products also had a brief spike (ho-ho-ho for those of you who might remember the Jolly Green Giant ads), but quickly returned to earth, possibly giving short-sellers the last laugh. We continue to hold our position based on the company’s fundamentals.

We are not projecting a continuation of 20%+ quarters, but if the world returns to what used to be considered normal, we still like our portfolio positioning. Growth stocks have had a long run and we now seem to be witnessing a turn toward value.

                                                                                                                                                 Abbott J. Keller, CFA
                                                                                                                                            Chief Investment Officer