Q4 Investor Audibles: Tactile Fund, Hayden Capital, Robotti Value Investors
Three investment fund managers discuss their Q4 2024 performance and outlook, focusing on shifts from US tech dominance to international markets and physical assets. All three emphasize opportunities in undervalued sectors while noting concerns about AI disruption to software companies and currency devaluation risks.
Summary
Dave Waters of Tactile Fund reported a 20.5% return for 2024, focusing on physical assets like railways, real estate, and agricultural companies as hedges against currency devaluation and AI disruption. He argues that tech giants like Meta and Alphabet are becoming more capital-intensive with AI infrastructure spending, potentially making them resemble traditional industrials rather than asset-light businesses. His fund performed well in Swiss Alpine railways and Australian agriculture but struggled with North American food companies and European luxury holdings.
Fred Liu of Hayden Capital discusses the first international market outperformance since 2017, with his portfolio losing 12.9% in Q4 but maintaining a 14.8% annualized return since inception. He addresses the AI disruption fears affecting software companies, arguing that while AI can replicate code, the real value lies in customer relationships, trust, and business process knowledge. Liu believes network-effect businesses like gaming platforms and e-commerce companies remain defensible because their value comes from scale, logistics infrastructure, and proprietary data rather than just code.
Bob Robotti of Robotti Value Investors emphasizes his strategy of investing in cyclical businesses emerging from prolonged downturns, particularly in industrial sectors. He notes the continued rise of gold prices as countries seek alternatives to dollar-based assets, and highlights opportunities in offshore energy services and building products distribution. Robotti argues that extended downturns force industry consolidation, remove excess capacity, and create stronger, more disciplined operators positioned for sustainable recoveries.
About this episode
<p>Welcome to another episode of Q4 Investor Audibles where I read three letters from value investors. This week, I read: </p><ul><li>Dave Waters' Tactile Fund</li><li>Fred Liu's Hayden Capital</li><li>Bob Robotti's Robotti Value Investors</li></ul><p>I hope you guys enjoy!</p>
Key Insights
- Waters argues that AI infrastructure spending is making tech giants like Meta and Alphabet more capital-intensive, potentially transforming them from asset-light to industrial-like businesses with massive ongoing maintenance requirements
- Liu contends that software companies' core value lies in customer service, maintenance, and business relationships rather than code itself, making them less vulnerable to AI disruption than markets currently price
- Robotti observes that prolonged industry downturns create structural improvements through consolidation and capacity removal, transforming chronically oversupplied markets into structurally tighter ones
- Waters identifies two major investment risks driving his strategy: long-term currency devaluation with structural inflation, and technological disruption of existing business models
- Liu argues that network-effect businesses remain defensible because AI cannot instantly recreate the trust, scale, and interconnected relationships that make these platforms valuable
- Robotti notes that recoveries from cyclical downturns are rarely linear, requiring patient capital to persist through inevitable pullbacks and periods of renewed skepticism
- Liu suggests that in an AI-driven world, the largest e-commerce platforms will become more valuable because they hold the richest proprietary datasets that AI agents will rely on for purchase decisions
- Waters believes physical assets like railways, mineral resources, and agricultural operations will maintain pricing power against inflation and cannot be replaced by artificial intelligence
Topics
Transcript
Hey guys, this is another Q4 Investor Audible series. I've got three letters I'm going to try to get through. The first one is Tactile Fund, which is Dave Waters, I guess his new fund. And then second one is Hayden Capital, Fred Liu's fund. And then the last one is Bob Rabadi, the Rabadi Value Investors letter. So three good letters here. This will probably be about 30 minutes or so. So let's get after it. Let's start with Dave Waters, Tactile Fund. Dear partners, Tactile Fund finished the year on a satisfactory note, rising 4.5% in the fourth quarter. For the year, the fund rose 20.5%. A single year is far from sufficient to judge the success of…
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