We recently spent some time travelling through the US meeting with companies and like-minded fund managers to expand our universe of ideas. We believe that during our investment process there is no substitute to meeting with companies face to face in order to further our due diligence beyond the financial statements. On top of what we learn about the individual companies we also get a feel of how the economy is tracking, much better than what we would get in reading the press. In our view the US economy continues to be sluggish and there are signs that the industrial sector is not having the bounce many were expecting.
One of the best meetings we had was with Ron Blumkin who is the CEO of one of Warren Buffett's companies, Nebraska Furniture Mart (NFM). NFM is the largest home furnishing store in North America selling furniture, flooring, appliances and electronics. It was founded in 1937 by Rose Blumkin and it has been run by the Blumkin family ever since. The stores are located around the mid-west of the USA, far from the cries of Wall Street, and the majority of their customers are low-middle income earners. Due to their experience and their customer demographic we believe there would be few people who have such a good view as to how the average American consumer is fairing at the moment.
To give you an idea of how they are tracking in terms of sales, consider this; the business never had an 'off-sale year' (meaning a year in which their largest sales period showed a decrease in revenue) until 2009. For 2016 avoid this things would need to pick up soon. This illustrates just how unwilling the consumer is to part ways with their money at present.
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