January 9, 2020

Accounts managed by Hangar 4 Partners LLC Eagle I, L.P. ended the both December quarter and full year strongly (if you’d like our actual performance data please call).   The S&P 500 Index and the Nasdaq Composite were up about 8.5% and 12.2% for the quarter and 29% and 35%, respectively for the full year. From a macro prospective, the quarter was impacted by the on again off again Chinese trade deal, ultimately ending in a phase one agreement between the US and China, to be signed in the coming weeks. While in the background, but perhaps more important, fears over slowing worldwide economic growth abated somewhat, as green shoots started to appear in some offshore markets. Simultaneously, the Federal Reserve finally got the Trump religion and signaled a more dovish stance. Against this backdrop, the US consumer continued to spend, propelling the economy, but it must be noted that what the consumer is willing to spend money on has been changing.

Along with select consumer names, our technology and healthcare positions performed well. Here again, important secular forces are afoot and we believe we are very well positioned to take advantage of the very changes likely to occur.

Entering 2020, we note a number of Market risks. The most obvious is the upcoming Presidential election. Though the Market is discounting an incumbent victory, any change here could have a dramatic impact on equity valuations. Impeachment thus far has been a non-issue, and likely to remain so. But perhaps the most important risk factor, as is always the case, is the trajectory of future earnings. Overall valuations suggest an acceleration in the rate of growth sometime this year. If this acceleration doesn’t occur, or falls short of expectations, it’s likely a meaningful correction could ensue.
Notwithstanding these factors, the powerful trends influencing almost everything about how we live, work, play, and even heal are actually accelerating. New communications infrastructure (5G); new software approaches (cloud and block chain); new healthcare approach (Immunotherapy and gene therapy) are but three areas of change. Following a roadmap provided by these trends, leads to new applications, new hardware approaches, new semiconductor opportunities, and the like. Opportunities that were unimagined just a decade ago, will become commonplace in the coming years. Thus we enter 2020 full of optimism, but ever mindful of short term Market risks.

Michael P. DeSantis                                                                                                                    Bruce M. Lupatkin
General Partner                                                                                                                          General Partner