On the Road, COVID-style: Life is a (Virtual) Highway
The life of a Pembroke portfolio manager is one that has typically entailed a good deal of time on the road. Under normal circumstances, we use the “On the Road” piece in Perspectives to describe our travels and bring to life our research process by highlighting companies and industries that are the target of our diligence efforts. In pandemic times, however, such travel is restricted, and our research efforts have evolved accordingly. Kilometers traveled by our team members on planes, trains, and automobiles have been replaced by kilometers traveled by bits of data moving at the speed of light, as voice and video calls take the place of in-person interviews for the time being.
While the change in our research practices has been abrupt and forced, we are very pleased with how technology has allowed us to do our work with minimal impact to the effectiveness of our diligence efforts. Our IT team has worked tirelessly to ensure that we are all equipped from a hardware and connectivity standpoint to fully engage in a COVID business environment. When we step back and look at the past six months of research activity at Pembroke, a few key takeaways emerge:
- Management teams of existing and prospective investments have been accessible. We believe this is a combination of (1) the teams making a concerted effort to communicate with stakeholders in uncertain, turbulent times, and (2) the teams working largely from home and simply having more room in their schedules with traveling and commute times slashed.
- Investment conferences, which are important forums for receiving updates from management teams and generating new investment ideas, have transitioned nicely into virtual formats. Pembroke’s participation in these conferences has in fact increased during the pandemic, as the ability to attend virtually without travel gives us the flexibility to take part in more of them.
- Events hosted by publicly traded companies, such as annual general meetings and investor days, have moved to online formats. While many companies had previously streamed these events, they have evolved to include a much greater degree of interaction with online participants.
- Marketing of initial public offerings and equity raises has transitioned entirely to virtual forums. It was previously unthinkable that a company could raise money without a fully marketed, physical roadshow. Successful issuances in the past six months, however, have turned this thinking on its head.
- The investment team is collaborating well and working productively, despite not being together in the office since March. We have leveraged communication and workflow tools to great effect and feel that the quality of our research output and our decision-making at the portfolio level has not been compromised and some members of the team feel that they are now more effective than they were previously.
As we enter the autumn season and a second wave of the pandemic emerges, we do not anticipate much of a change to our current research practices for at least the next few quarters. We are mindful, however, that a “new normal” will emerge post-COVID, and that this new normal may not match the pre-pandemic environment we were accustomed to. While we accept that “predictions are hazardous, especially about the future”, we do anticipate that some of the changes we have seen brought about by COVID will be here to stay:
- Management teams of public companies will be less willing to travel in order to conduct in-person meetings with investors. Videoconferencing has proven to be an effective means of communicating with the market, and management can allocate the time saved from the lighter travel schedule to other priorities.
- Some investment conferences will adopt a virtual-only format permanently. This makes sense from a cost and productivity standpoint for both participants and hosts. Venues are expensive to rent, and travel/accommodation costs can be high for attendees.
- The use of technology-enabled collaboration tools will be cemented within Pembroke. Prior to COVID, these tools were in use, but the lockdown has both broadened and deepened the integration of these tools into our daily processes.
What does this mean for the Pembroke research process in the longer-term?
We have always stridently believed in the value of engaging in face-to-face interviews with management teams and in conducting on-site visits to the headquarters and facilities of existing and potential investments. This has not changed. In a post-COVID world where more virtual interaction is the norm, we expect that physical interaction and on-site research will be even more valuable to Pembroke and its investors, simply because less of this will be done by others. We will take full advantage of opportunities presented by the “new normal”, but when it is safe to do so, we will also go back on the road to surface investment ideas on behalf of our clients, just as we have been doing for 52 years. We look forward to sharing the stories from these travels in future versions of Perspectives.
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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.