The second year of the Covid pandemic was, in many ways, more challenging for investing than year one.
Some businesses (dining, travel, entertainment and fitness) have been, perhaps irreparably, damaged. Other businesses (building products and anything related to home improvement) have experienced a renaissance. Most of the businesses we intersect with saw gradual improvement in demand and operating performance. These dynamic conditions complicate and place a premium on identifying, forecasting and underwriting a stabilized recurring free cash flow stream. Add to this the prospect of a dramatic shift in Federal Reserve monetary policy and the specter of rising long term interest rates with the corresponding impact on valuations, and we sense a need for heightened cynicism, prudence and discipline.
We believe we did just that in closing these four investments in 2021.