In his latest 2021 Annual Meeting, Bob Robotti discusses the revenge of the stock-picker. Here’s an excerpt from the meeting:
So the third point I want to talk about is the revenge of the stock picker. We’ve gone through a decade where passive management continues to bring in capital to it, and it makes sense.
The idea that you can efficiently allocate capital at low cost basis if you’re buying the top companies in the concentrated few, that makes sense. You buy it and you buy it all. It’s okay because there are relatively few companies that have been extremely successful that drive the S&P 500 stock market, and it’s continued to concentrate down to a select few.
So that’s an efficient way to do it that’s low cost that makes sense. What you have seen also though is recently this past year small caps really have started to perform well, value has started to perform well.
So, therefore, people are looking to now allocate capital to those segments of the market. How do you do that? The quick-and-easy way is you buy some kind of index. And again, buying the index means you’ve got to buy them all. And so, therefore, here you’ve got many more companies. And the differentiation and dispersion between the results of those companies is dramatic.
A lot of these companies are probably doing reasonably well and their earnings have improved, but really maybe from transitory factors. Instead we know we own companies that have structurally changed, and, therefore, the sustainability of that and the ability to continue to grow those earnings, we think, is clear.
And that’s what differentiates us and we think that will mean the performance that we’re going to get will be much better than what the indices will get for small cap because it’s all about bottom-up stock research on companies, understanding the companies, understanding their industries.
Those dynamics will enable us to differentiate and understand and own the cheap stocks that will have sustainable earnings that will grow earnings from here and in that process have strong financial positions.
You can read the entire transcript of the Annual Meeting here:
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