Prepare Your Portfolio for the Long Haul & Mimic This ‘Classic’ Value Investor

Subsea 7, meanwhile, is a contractor that partners with major energy companies to develop deepwater projects. As Robotti puts it, Subsea’s “fleet of offshore drilling rigs drilling new wells continues to expand,” and “barriers to entry into the business grow larger.” Contract award delays have detracted from the company’s bottom line, but it appears that this has just provided a prolonged buying opportunity for value investors. Shares of Subsea currently trade at a bargain-bin PEG ratio of 0.57, and the stock’s forward earnings multiple of 13.7x is far below its industry’s average of 18.8x.

Housing

The firm is also noticeably overweight industrials, which Robotti mentions in his commentary as “directly tied to U.S. homebuilding activity.” More specifically, we know that Builders FirstSource, Inc. (NASDAQ:BLDR) is Robotti’s third largest non-cash position. Builders FirstSource also has relatively strong interest in the hedge fund industry, and is held by Chuck Royce (check out Royce’s entire equity portfolio), Richard Driehaus, Israel Englander, Cliff Asness and Jim Simons, to name a few (see every hedge fund invested in BLDR).

Builders FirstSource has its fingers in many aspects of residential construction, including trusses, windows, doors, stairs and other related products. The company will be an obvious benefit of a housing market rebound over the next 5-10 years, and it’s very cheap on a price-to-sales (0.62x) and enterprise value-to-revenue (0.84) basis. With 13.3% of the company’s outstanding float currently shorted, there are some market players betting that FirstSource is a value-trap, but over the long, long run, we’d have to agree with Robotti on this one.

Disclosure: I have no positions in any of the stocks mentioned above