COVID-19 considerations

by Brad Henry ([email protected]) 681 views 

The COVID-19 pandemic has undeniably affected Arkansans’ daily lives and routines. One night recently, my 9-year-old daughter asked if I experienced something like this when I was her age. Of course, I had to answer no.

In less than a week, we reached uncharted territory. Nearly 500,000 Arkansas K-12 students are taking classes online, restaurants are transitioning into drive-thrus, curfews have been implemented, and all of us are using brand new terms like social distancing and shelter in place.

It’s difficult to live in uncertain times, and our state has seen real consequences. We’re unable to see loved ones in nursing homes, panic shopping has left some shelves bare and the news about COVID-19 changes by the minute. The most fortunate Arkansans are mostly working from home while others are getting laid off or are unable to work at all.

Our thoughts are with those directly impacted by this unprecedented pandemic, and at the same time, it’s been inspiring to watch local business adapt to continue serving the community. Natural Capital has been affected but not to the extent of other businesses. In the immediate short-term, we are focused on ensuring our existing investments remain stable and keeping in constant communication with contacts throughout the United States and internationally.

And yes, during these uncertain times, Natural Capital is still actively reviewing investment opportunities. We have a long-term investment horizon and follow a prudent due diligence process to make decisions based on the next 10 years, not the next few months. Our investment focus is companies and real estate located in Arkansas and the Heartland with a track record of producing stable cash flow. Historically, companies and real estate with strong balance sheets and stable cash flow recover well following economic shocks.

Most hope and believe this crisis will be short-lived. Will we have to operate under the current rules for four weeks, four months or longer? Arkansas can take some clues from other parts of the world, but at this point, no one has a guaranteed crystal ball. However, as we recover, it is reasonable to expect the regional economy should produce viable investment opportunities.

Arkansas’ unemployment rate has consistently remained below the nation’s, and the state should continue to benefit from having a diversified economy. Agriculture, tourism and manufacturing are three of Arkansas’ largest industries. Each of them, especially tourism, will most likely face short-term disruption. Historically, they all have shown the capacity to bounce back. Specifically, the manufacturing sector — which comprises 12.7% of our employment base — has routinely provided stability to Arkansas’ economy.

As for the greater Heartland region, demographic trends point toward long-term growth opportunities. A recent study by Heartland Forward states the Heartland is doing a better job of retaining and attracting Millennials. Most importantly, they expect the trend to accelerate in the coming years. Additionally, The Wall Street Journal recently ranked the best U.S. job markets with populations of less than 1 million. Of the top 50, 21 of the best job markets are located in the Heartland. Arkansas is well-represented, with Northwest Arkansas ranking No. 4 and Jonesboro ranking No. 35.

To date, our state has been blessed with incredible leadership. We appreciate the work being done by Gov. Asa Hutchinson, our congressional delegation, Little Rock Mayor Frank Scott, University of Arkansas Medical Sciences Chancellor Dr. Cam Patterson, the Northwest Arkansas Council and their various staffs. Their actions and clear communication have provided great strength during the ongoing crisis.

It has been humbling to watch the Arkansas medical community serve our state under such immense pressure and obstacles. They continue to provide high quality care despite facing a global pandemic the likes of which we have never seen.  I know our entire state is grateful and thankful for their ongoing efforts.

While the uncertainty continues, these are just a few reasons why we believe the economy of Arkansas and broader Heartland region will continue to grow over the long term. We hope everyone does their best to stay safe and healthy.

Editor’s note: Brad Henry is a co-founder and managing partner of Natural Capital, an Arkansas-based private investment fund. The opinions expressed are those of the author.