I sat down with my friend Robert “Bob” Robotti, the president and chief investment officer of Robotti and Company. Bob is an expert in Special Situations, Energy Industry, and Home Building. In this episode, he shares about what he’s learned throughout his career, what he sees for the future, and advice for new investors.
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Bob Robotti is the founder of Robotti & Company Advisors, a NYC-based US registered advisor. We are dyed-in-wool value investors who buy companies at valuations far below replacement value. We focus on cyclical businesses that have consolidated and are positioned for dramatic growth recoveries. Today, in an era we see as ‘The Revenge of the Old Economy’ we’re invested in businesses with Graham-Dodd valuations with Buffett-esque ‘better’ business attributes.
We are long term investors who frequently nurture supportive relationships with our investments. As an example, Bob currently sits on the boards of AMREP Corporation (NYSE:AXR), Tidewater (TDW:NYSE), PrairieSky (TSX:PSK) and also is the Chairman of the board of Pulse Seismic Data Inc. (TSX: PSD). Prior to founding Robotti & Company in 1983, he was the CFO of Gabelli & Company. Before that, Bob was a CPA auditing many investment advisors, most notably Tweedy, Browne. He holds a BS from Bucknell University and an MBA from Pace University.
Bob started his career as an accountant and his first job was working an audit at value investment firm Tweedy, Browne. He gained real world experience on the job and by becoming the mentee of one of Tweedy, Browne’s retired partners.
“That was my introduction to investing. Not through school and education and finance classes, fortunately, because I probably would’ve been corrupted by some crazy ideas. Instead, it was what we owned and why we owned it.” - Bob Robotti
Working as an accountant made it easy for Bob to understand value investments. As Warren Buffett said, “Accounting is the language of business,” and you need to understand the language in order to converse in it.
Capital is in the process of starting to reposition. After the financial crisis, people lost sight of the fact that valuations matter and are a critical part of decision making today.
Bob’s investments are concentrated in North America; however, he also sees huge international opportunities.
“US large cap stocks have been the stellar performers for such a long period of time, but pull on capital has dramatically changed the value differential. So there’s a huge opportunity set.” - Bob Robotti
Bob has spent ample time traveling through Asia and meeting with businesses there to learn about their business practices. He believes that China is a mature economy, not an emerging market. However, after being a low cost provider for decades, China is now seeing its own inflation and rising costs.
“China is a critical element in why I’m invested so much in North America.” - Bob Robotti
The overabundance of fossil fuels in North America gives North American businesses a competitive edge over the rest of the world, and that isn’t going to change anytime soon.
Bob is on the board of a couple of energy companies and has a unique opinion about ESG. He wants to make oil and gas companies part of the solution instead of pitting fossil fuels against renewables. Periods of high gas prices provide more opportunities for renewables, and it makes the industry more motivated to try new methods to capture methane.
Bob has been investing in the housing industry since 2009 and recognizes that there are periods when things slow down and stocks come down. That’s what we’ve seen this year. Newer investors get prematurely concerned about the future outlook of the market instead of recognizing the cyclical patterns.
Another industry that has popped up since the financial crisis is the build to rent business. This business is extremely well financed and has a lot of attractive attributes, but there’s a shortage of supply.
With the demand for housing so high, Bob thinks it is a good time for investors to buy buildings to rent to companies that are well positioned and well managed.
Stay invested. Stay with companies and industries in spite of market to market losses and financial difficulties. Keep your eyes on the opportunity that can come together. This lesson is crucial when you invest in cyclical industries like housing and oil and gas.
The information presented in this podcast or available on the website is not intended as and shall not be construed as financial advice. This podcast is produced for entertainment value. Investing is inherently risky. And I encourage you to seek financial advice from a professional who is aware of the facts and circumstances of your individual situation.