For over three decades, Bob Robotti has not just participated in the market, he has decimated the average returns of the S&P 500. With a blend of keen insight, patient strategy, and an unerring eye for value, Robotti's investment acumen has led his Ravenswood fund to nearly a 100-fold increase since its inception in 1992.
In a landscape where beating the market consistently is almost a mythic feat, Robotti has shared his unique approach, in an interview with Business Insider, to uncovering hidden gems in the stock market. He also shed light on common pitfalls investors often fall into and shared insights into one of his most successful trades.
Inside The Investment Strategies Of This Market-Crushing Manager
Robotti's investment philosophy is deeply rooted in the value boom of the mid-1970s. He holds the belief that markets are inherently inefficient, leading to stocks often trading above or below their actual worth. This, according to Robotti, opens up opportunities for active managers to reap substantial returns.
"What we're really looking for is opportunities where that dollar can also compound to be two, four, 10," Robotti stated.
"I am not a value investor — I'm a growth investor. I am looking at businesses that have significant growth from a cyclical recovery and a depressed business."
Identifying Undervalued Companies
His strategy revolves around identifying undervalued companies and patiently waiting for their rebound. Robotti believes that the market often overlooks the economics of a business, and when it finally recognizes it, the stock price follows suit.
"It's all about the economics, stupid — that's what drives stock prices," Robotti said, echoing the famous saying by political strategist James Carville.
His Best Trade Ever
Robotti illustrated his strategy with the example of Tidewater (NYSE:TDW), a Houston-based oil services firm. When he joined the board in June 2021, the company was trading for about $14 per share. Fast forward three years, and it's trading for over $90.
"Three, four years ago I went around to people and said, 'Here's the stock: This company trades for 20 cents on the dollar, the business is one in which the supply-demand is going to come in balance; when it does, the value of this business will be equal to the replacement cost of those assets, which is five times higher than where it is today,'" Robotti explained.
Despite Tidewater's success, Robotti remains focused on the long term. "If you bought it at 20 cents on the dollar and it doubles, you don't sell it at 40 cents on the dollar," Robotti said. "If anything, you buy more at 40 cents on the dollar because the economic fact pattern that drives the realization of the economics is manifesting."
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