Owning Excellent Companies During the 2020 Pandemic & Bear Market

During the onset of the 2020 pandemic, many investors around the world experienced blind panic. But with Intentional Ownership, we were able to not only help our clients face the pandemic with confidence and a sense of calm—but to actually leverage the year’s unprecedented circumstances to their advantage. Here’s how our unique approach to the 2020 bear market helped our clients come out on top. 

Prioritizing Excellent Companies In the Face of a Pandemic

At the very beginning of 2020, our Intentional Ownership team had completed our usual assessment of companies. We ranked a wide variety of potential investments based on our core 5-point criteria and decided that, among a long list of other companies, we would continue to invest in a company that has historically been a favorite of ours—Cracker Barrel.

Under typical conditions, Cracker Barrel is a company that exemplifies everything we’re looking for in a sound investment. We love their family values, their unique dining and retail store experience, and they’ve been an asset to our dividends strategy for many years. 

However, just one quarter into 2020, the world was blindsided by the COVID-19 pandemic. We recognized that this situation called for a reevaluation of all the companies we’d previously deemed excellent. Thriving under normal circumstances was one thing, but who could we trust to continue thriving in light of these unprecedented conditions?

Shifting Gears In March 2020

In checking our companies against our five pillars of Intentional Ownership, we immediately found a problem—Cracker Barrel was not equipped to succeed in the conditions created by the COVID-19 outbreak. Their combination retail/restaurant income model depended too heavily upon consumers being able to physically shop on location. Even more, they proved early on that they weren’t able to evolve their infrastructure to adequately provide takeout options to their clients.

For these reasons, we decided to pull out of Cracker Barrel and fill their spot with a company that was better suited to serve consumers during these difficult times.

That company was Big Lots—a household name and a long-time staple for bargain shoppers. Unlike Cracker Barrel, Big Lots was perfectly positioned to thrive during the health crisis. In addition to their extremely accessible pricing model, Big Lots already had infrastructure for a powerful, user-friendly online marketplace. When people stopped wanting to shop in-person, Big Lots was ready to help them stock up on household essentials—at a fraction of the price, from the comfort and safety of their homes.

Return On Investment: Big Lots

When we bought into Big Lots at the top of 2020, we were able to secure our investment at $19.50/share. Over the course of the year, our original assessment of Big Lots held true. While many other companies struggled to keep inventory, manage shipping delays, and attract reliable team members, Big Lots only became more and more successful. Their robust infrastructure was perfectly designed to handle these sorts of stressors, and time and time again, they were able to provide much-needed essential goods to consumers during a time when other organizations were failing.

Over the course of the next 12 months, Big Lots stock prices shot up to about $63.99/share. Our investors enjoyed a 150% return on their investment in Big Lots—with the added bonus of knowing their money had supported a company that was helping to keep American households well-stocked and safe through one of the most trying times in our nation’s history.

* Past performance is not indicative of future results. All information provided herein is for educational purposes only.

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