At the Capstone Student Investment Conference 2026 (CSIC 2026), Robotti & Company founder Robert Robotti spoke about his strategy of investing in ugly ducklings he believes are poised to turn into swans.
Background on Bob Robotti
Before founding Robotti & Company in 1983, Robotti served as vice president and chief financial officer of Gabelli & Company. He’s also a director on the boards of AMREP Corp., Tidewater and Pulse Seismic. Robotti holds a BS from Bucknell University and an MBA in accounting from Pace University.
Robotti & Company seeks to exploit the “inefficiencies of an ‘efficient market,’” searching for publicly traded companies trading for less than their intrinsic value. The firm utilizes a contrarian style, which means it tends to invest opposite from the market.
An odd world
Robotti thinks the world’s been an “odd place” for the last 10 or 15 years, adding that we’ve lived through what he sees as a “totally unique period of time.” Given the younger age of most of the audience, Robotti said they must just think this is the way the world is, meaning there’s a general perception of how the world, financial systems and economies work.
However, he also sees a “radical risk of change and then dramatic change.” Turning to the Great Rotation, or the movement of capital from where it’s been to places where it makes “a lot more sense,” Robotti said he thinks it’s already started and will continue to gain momentum. He also thinks capital is moving toward much better investments with much better risk/ reward profiles.
“Therefore, will capital wake up before the water boils?” Robotti said “… I had the good fortune of graduating college in 1975, but that was the beginning of the rotation out of the Nifty Fifty into value. So it’s the beginning of value investing, and I walked in the door of one of the preeminent firms, Tweedy Browne, and then worked for three years for Mario Gabelli.”
The first thing he ever bought was New York City Housing Authority bonds at 33 cents on the dollar, when New York City seemed like it was going bankrupt. Robotti got all his money back with a great return.
Stock pickers will win
“The next decade belongs to stock pickers,” he declared. “So the world’s going to change radically, and that’s one of the beneficiaries… A recurring thing is you gotta have patient capital. So I can be patient. I can think I understand this business. Yes, the market’s worked against me, but [if] the capital that I manage also isn’t comfortable with my decision-making process, then I can’t do that because that capital is a critical piece. And you have to be patient because things will work against you undoubtedly, and when they work against you, you will have the best opportunities to deploy more capital and get higher returns.”
Robotti noted that we’ve been through an extended period when interest rates dropped from 15% to 0%, and then negative rates were in place. He described the very low interest-rate environment with low inflation as a “very odd phenomena,” adding that the likelihood of that returning is not in his lifetime, but perhaps in the students’ lifetimes.
Robotti also said that fewer people talk about the risk in the private markets and that there are many fewer publicly traded companies today because those companies exist in the private markets. He added that it’s been a great time to invest in the private markets because when interest rates fall from 15% to 0% and you buy businesses and lever them, the multiples expand rapidly as the rates fall, making the businesses worth more.
“However, when interest rates can’t go below zero, part of that scenario is different,” Robotti added. “In the meantime, the capital that that’s attracted means that there’s all kinds of risks in that business.”
A warning about private credit
According to him, the winning owner of a private equity company is the one who pays the most. On the other hand, in the public markets, it’s buying better companies at a fraction of the multiple with balance sheets that may have net cash on them. However, Robotti said the capital is running into private businesses because they don’t market to market and the markets are more and more volatile all the time.
Meanwhile (echoing something Rubric Capital said recently), private credit is “extending on life support that business and those risks there,” which he said is a “huge factor” he feels is very impactful for U.S. small-cap investors. Additionally, Robotti pointed out that money continues to go into passive funds, which makes all the sense in the world until it doesn’t.
He sees the greatest risks in companies that have valuations with risks associated with them.
Why the world is so odd today
“Here’s all to remind you that economics, business, investing, markets are cyclical,” Robotti added. “It’s hard to remember that in a world in which it hasn’t been cyclical. The same things won forever, and so that’s an odd thing.”
Over the decades, the industries that have been the big winners have changed all the time. However, over the last 15 years, the same winners have continued to win. Robotti said that’s never happened before.
Calling attention to something German economist Rudi Dornbusch said, Robotti said things take longer to happen than you think they will, but then they happen faster than you think they could. For example, the Japanese stock market has been dead money for years, but suddenly, the market is up more than 100%. European bank stocks exploded 66% last year.
“We live in a world, there’s more and more data,” Robotti said “It comes quicker, and every time there’s a piece of data, some computer is gonna act on that piece of data and do something, and therefore they just can’t help themselves. So therefore, think about things, think about, And don’t say, ‘Well, in the last 20 years, every time this has happened, then this has followed.’ Is that 20-year period exemplary of what the current situation is, what the future holds, or are you making a very bad assumption based on faulty thinking? So think about the things that you’re making decisions on. That will be a critical sign of your success.”
Where Robotti looks for opportunities
Recalling what he spoke about at Grant’s Conference 18 months ago, Robotti said he spoke about zombie companies in the Russell 2000, which he said are those that don’t make any money.
“That’s what you want,” he added. “You want to identify a company that makes no money but is a great business. And to build that business would cost the four, five, six times what it trades for at the time. And yet the opportunity set and the latent earnings that are building that business are dramatic. Understand the business, understand the industry, understand that. Identifying that company, and frequently they’re called value traps in the meantime while you own it, that they don’t do anything, and then suddenly… the longer it takes, the bigger the recovery happens, the larger the upside is when it does happen. So there’s a huge opportunity set and companies that are identified as zombies.”
Builders FirstSource and Subsea 7
For example, Robotti invested in Builders FirstSource in 2009, at the bottom of the housing crisis cycle. In 2011, investors could’ve bought it at half the price. He focuses on cyclicals like oil and gas, metals and mining, and industrials.
Turning to his thesis, Robotti presented Subsea 7. They have an outsized position in oil and gas and he said the company informs their view on the industry in terms of the business it does and the conversations it has with capital allocation by the major oil companies.
“They’ve been to the altar four times probably with Saipem,” Robotti added. “And they’ve agreed on merger terms, so it was the February of last year. So most likely the second part of this year that merger will complete. And we think that’s a further transformation of a business and a company that’s already transformed its industry to therefore have substantially better position with substantially higher earnings potential.”
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This article originally appeared on Hedgefundalpha.com and was syndicated by MediaFeed.org
