Video transcript
Larry DeMaria: First and foremost, I hope you and your families are safe and sound. I want to talk a little about my space and the impact from COVID-19, which has been profound and continues to be so.
I follow cyclicals broadly, but specifically around construction, vehicles, food equipment, agriculture, and mining. And every space has been deeply impacted and will continue to be so. But we do think there are some opportunities and pockets for long-term investors, for sure. Now the impact to this space has been quick and deep. In other words, April is probably the bottom, it doesn’t get much lower than zero. Manufacturers have been shut and demand has really screeched to a halt. And that’s following a very difficult March. But that probably means the second quarter’s probably the bottom, and as we go through the second half of the year, we’ll see more and more factories come online, we’ll start to see some more ordering, and we do expect a better condition and better numbers ahead, which we hope carry through into 2021. Obviously, that’s going to be a little bit contingent on the broader economy, the pace of a vaccine, and how we tackle this as a society. Now, on the focus of that, let’s think about what is different now and what will be different in the next two years, if not longer. We think that probably one of the biggest changes that impacts my group will be the focus on safety: safe equipment, safe technology, and really safety for the individual employee.
But we think safety, especially food safety, is going to be one of the really long-term secular changes that drives both our nation and more technology adoption to take workers out of harm’s way and to replace them with automation and to reallocate that human resource.
So, we know there’s a lot of challenges in the commercial food service space, for example, given that we’re not all rushing back to restaurants right away. But food processing companies, once we get back this bottom over the next few months, and the processing plants get back up and running at full steam, we think the food safety trend will be really profound over the next few years, if not longer. I think that’s probably the biggest change we’re going to see, and there is still a lot of risk in names especially around commercial, for example, agriculture, for example. But let’s not forget humans continue to eat, we still hope for growth in the middle class, and protein consumption and production continues to increase. I think these are valuable and long-term trends that will continue.