Welcome to the 32nd edition of the BKI Quarterly Report, prepared by Contact Asset Management (“Contact”).
2021 has been an extraordinary year. As the calendar year closes, we continue to experience the secondary effects from flooding the world economy with cash through global stimulus packages distributed during 2020 and 2021. We have written about our concerns with production capacity challenges, price rises and a global supply chain bursting at the seams several times in previous Quarterly Reports and Contact Insights pieces. We saw how negative operating leverage hampered many businesses in early 2020, followed by a quick recovery in demand of almost every good and service which restored sales numbers to kick these issues down the road. As we enter 2022, we face further issues involving inflation, a lack of service and labour shortages. We monitor these ongoing issues very carefully and focus on which companies have a fixed cost base and those companies that can pass on prices to their customers to ensure continued profitability and earnings growth. With these issues as a backdrop, we seek to identify which companies have pricing power.