Why Private Equity Changed the Opportunity Set

Robert Robotti, President and CIO of Robotti & Company Advisors, joins host Michael Mauboussin to explore a lifetime shaped by value investing. With deep roots in accounting and formative experiences auditing firms like Tweedy, Browne, Bob shares how those early exposures led him to a career buying underfollowed, undervalued companies. In this episode, Bob discusses how his contrarian approach has thrived amid market inefficiencies, especially in cyclical industries and under-the-radar public firms. He breaks down key investments, including Builders FirstSource and Tidewater, and explains why capital allocation, aligned incentives, and patience are critical to long-term success. He also addresses private equity, passive investing, and how AI might affect the future of both business operations and markets — and much more!

Key Topics:

• Introduction (0:00)

• Bob's upbringing and early exposure to entrepreneurship (2:09)

• How auditing Tweedy, Browne sparked Bob's interest in value investing (4:17)

• Learning through Tony Pustorino and practical accounting (4:32)

• Early influences from Walter Schloss, Joe Reilly, and Tweedy, Browne (5:39)

• Experience working with Mario Gabelli (6:57)

• Founding Robotti & Company and the original value edge (8:54)

• Explaining pink sheet stocks and early investment strategies (10:00)

• Philosophy on intrinsic value and discounted investments (14:31)

• Mispricings from passive investing and cyclical businesses (16:24)

• Views on private equity vs. public markets (19:27)

• Being a generalist with deep knowledge in housing and energy (21:45)

• Simplified valuation approach and the Builders FirstSource case (23:41)

• Portfolio construction, sizing, and turnover explained (28:58)

• Maintaining a patient capital base (33:38)

• The Tidewater investment: thesis, board involvement, and strategy (36:42)

• Capital allocation philosophy: buybacks vs. dividends (49:08)

• Executive incentives and importance of management quality (51:02)

• How Robotti sees AI impacting business and investing (53:13)

• Thoughts on traditional business education and tangible assets (57:13)

• Geopolitical risks, China's influence, and global economic concerns (58:03)

• And much more!

Mentioned in this Episode:

• Robotti & Company Advisors

• Tweedy, Browne

• Gabelli & Company

• Builders FirstSource

• Tidewater Inc.

• Amrep Corporation

• Pulse Seismic Inc.

• Museum of American Finance

• U.S. Securities and Exchange Commission (SEC)

• Lucadia National

• Third Avenue Value

• Canadian Natural Resources

• Think Again by Adam Grant

• Grit by Angela Duckworth

• Teaming by Amy Edmondson

• Quit by Annie Duke

Thanks for Listening!

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