“I try to remind people, whether you have a growth manager or a value manager, you’re going to go through cycles where you think you have a village idiot.” — Robert Rodriguez
Robert Rodriguez has earned many titles over the years such as ‘prophet’ by Barron’s, ‘doomsayers who got it right’ by The Wall Street Journal and ‘four horsemen of the market’ by MarketWatch; these titles illustrate his competency in the world of financial markets.
Rodriquez is currently the Managing Partner and serves as Strategic Advisor to the research and portfolio management teams for the FPA Small/Mid-Cap Absolute Value Strategy and the FPA Absolute Fixed Income Strategy. Prior to joining FPA, Bob served as Senior Portfolio Manager, Chairman’s Department of Kaufman & Broad, Inc., and Portfolio Manager at Transamerica Investment Services, Inc. Bob earned a Bachelor’s degree in Business Administration (Magna Cum Laude) and an MBA from the University of Southern California.
Robert Rodriguez is one person who is not afraid to state what he thinks is right regardless of the many cynics and detractors. The prediction made by Rodriguez regarding the internet stock market in the 1990s and the recent financial crisis of 2008 proved to be true overtime despite the public mockery and denigration.
Robert Rodriguez, also commonly known as Bob Rodriguez, hasn’t had it easy since the beginning. After his MBA from University of Southern California, he had to struggle to find a job in the financial sector. He got a job as a stock trader at Transamerica where he eventually became an analyst by covering sectors which his colleagues had dumped or let go. Rodriguez stated that it was hard to get a job with the last name Rodriguez, when he entered the financial field. Time and again he had to prove himself to the financial world, the dot com bubble incident being a prime example.
Rodriguez currently serves as a board member for the USC Center for Investment Studies and the USC Marshall School of Business Board of Leaders. He was also the recipient of the Marshall School of Business 1997 Alumni Award for Business Excellence.
Rodriguez’s prior experience includes serving as Vice President and Senior Portfolio Manager in the Chairman Department of Kaufman & Broad, Inc. He was also a Portfolio Manager at Transamerica Investment Services, Inc. He began his investment career in 1971.
During the 1990s when almost every single company was generating unbelievable amounts of cash and fund managers were investing like crazy in internet/technology stocks, Rodriguez, foreseeing the dot com bubble burst, started decreasing his tech stocks.
This conviction regarding the bubble burst and his actions, not only made him lose his reputation in the market, but some of his clients. Some of Rodrigquez’s clients were taken aback by his then believed ‘ridiculous’ action of shortening tech stocks and quickly left his two funds. Unfortunately, had they believed in Rodriguez, would those investors would have been among the few who survived the disastrous impacts of the dotcom bubble burst.
Initially his decision cost his funds on a short-term basis as his assets decreased from $800 million to $350 million with most stocks in his portfolio underperforming. However, his prediction came true in 2000. While the majority of the country watched their investment return crumble down to an unbelievable low during the period of three years from 2000 till 2003, Rodriguez’s funds crushed the market, returning over 38% in 2001, -4% in 2002, and 39% in 2003, far exceeding the returns of the S&P 500.
His proficient prediction, or prophecy as some might say, didn’t stop there. In 2005 he again saw trouble in the mortgage sector with high default figures. He converted 43% of his FPA Capital’s holdings and approximately 60% of his FPA New Income’s holdings to cash, an action which again led to his clients doubting his investment expertise. FPA Capital like every other fund experienced downfall with the market crash, but unlike every other fund, it managed to recover rapidly in, 2009 with 40% returns.
Rodriguez credits much of his interest and aptitude in stocks to Graham’s Security Analysis’ which he found in his university library. Rodriguez, is warning of another catastrophic recession due to the high amount of debt that the Government has been taking on.
Robert Rodriguez: Investment philosophy
Fresh out of college in 1971, Rodriguez learned his lesson during the initial years of his career in the stock market. He saw the stocks of one of the companies he had invested in go down from an initial price of $22 to as low as 88 cents. Despite the fact that he held on to the company’s stock on long-term basis and eventually saw it rise, this experience taught him one of the most valuable lessons, which became an essential component of his investment philosophy: learn from past mistakes and research to better understand the company.
Owing his realization of the profitability of value investing as described by Graham in Security Analysis, he is a staunch believer of determining a company’s value by looking past and beyond the price fluctuations and market trends. Rodriguez focuses on investing in undervalued companies with low market capitalization. Strong balance sheet, free cash flow, capable management and comprehensive understanding of company’s business are underlying principles of his investment philosophy. Rodriquez also likes companies with a strong moat. He will invest in stocks, high yield bonds and anywhere he finds value.
He believes in high margin of safety to ensure high liquidity to cushion losses in time of crises. When he predicted the 2008 financial crisis, he converted approximately 40% of his FPA Capital asset and 60% of his FPA New Income asset to cash to maintain and ensure liquidity after the crisis hits.
Rodriguez would rather hold cash than invest in stocks just for the sake of being fully invested. Where a majority of fund managers aim to increase assets and maintain a wide customer base regardless of the inability to deliver expected returns or quality service,Rodriguez would rather lose his clients than deceitfully lead them into investing in his funds knowing their investment would not reap profitable gains.
His equity fund has a concentrated portfolio of 30 company stocks which Rodriguez buys after extensive research. As mentioned before, he takes a large amount of time investigating and researching companies. For example, before investing in additional stocks of a craft-supply company called Michaels, he extended his research by gathering information regarding the business strategy of the company by consulting many of Michaels’ store managers. You can call Rodriguez a practitioner of “scuttlebutt”. Right now, Rodriguez is heavily concentrated in several oil and gas drillers.
In short, Robert Rodriguez can be described as an opportunistic long-term focus investor with the outlook of a short-seller. The market observations and prophecies of this proclaimed ‘prophet’ are all illustrations of his strong belief in his investment philosophy.
Top ten holdings of the FPA Capital Fund, Inc. as of September 30, 2014.
- Arrow Electronics
- Western Digital
- Rowan Companies
- Apollo Group
- Atwood Oceanics
Current holdings according to the FPA Capital Fund, Inc.’s Fund Fact Sheet
Robert Rodriguez: Books
Lowenstein mentions Rodriguez’s foresight into the coming financial crisis and his decision to make portfolio changes, including piling up on cash as the bubble got bigger.
Robert Rodriguez: Quotes
“You have to be smoking dope to think stocks will realize the kind of expectations built into prices.”
“We try to take advantage of other investors’ emotional or irrational reactions.”
“You never know the value of liquidity until you need it and don’t have access to it.”
Robert Rodriguez: Free articles (Newest First)
- Bob Rodriguez: New Great Recession Coming in 3 Years
- Robert Rodriguez – FPA Capital – Portfolio holdings of Super
- Bob Rodriguez Rare New Interview
- Bob Rodriguez’s speech to CFA Society of Reno
- ThinkAdvisor interviews Bob Rodriguez
- Bob Rodriguez on the Dangers in Today’s Markets
- Bob Rodriguez’s speech at “A Day with FPA” 2014
- ALL IN! by Robert L. Rodriguez
- FPA Capital’s Bob Rodriguez Says Economic Meltdown Looming: AdvisorOne Interview
- No Free Bubble
- The Bear Facts: Mortgage Woes Are Apt to Worsen
- Robert Rodriguez Likes Cash
- Bob Rodriguez: The man who sees another crash
- Success may diminish value stock funds’ appeal
- INVESTING WITH: Robert L. Rodriguez; FPA Capital Fund
- Mutual fund scandals
Robert Rodriguez: Paywall Articles (Newest First)
- Stimulus deal promising; housing risks still plentiful (Paywall)
- Investors see spillover from subprime loans (Paywall)
- INVESTORS’ QUANDARY (Paywall)
- ANNUAL REVIEW & OUTLOOK: MUTUAL FUNDS; In Bond Funds, Risk Takers Are Rewarded; The emerging-markets category averages a gain of 30.1% for the year. ‘Junk’ rebounds and has a 24.1% return. (Paywall)
- NEWS ANALYSIS; What Is Buffett’s Motivation?; Some analysts question the investor’s decision to step into the state’s quagmire (Paywall)
- Delusions dying, investors return to the fundamentals (Paywall)
- TECH INVESTORS NEED TO GET BACK TO BASICS (Paywall)
- YOUR INVESTMENTS / THIRD-QUARTER INVESTMENT OUTLOOK AND FUND REVIEW (Paywall)
- Beating the index Firms chasing S&P 500 find a slippery slope (Paywall)
- MARKETS CLOSE WITH LITTLE CHANGE SOME INVESTORS FEAR THAT RECENT RALLY HAS LEFT SHARES OVERVALUED (Paywall)
- Investment Club Group Expands Its Horizon (Paywall)
- RUNNING OUT OF STEAM: Big Returns On Bonds Expected To Decline (Paywall)
- Analysts warn not to push panic button
- 1992’s Bond Fund Earnings Contain a Caveat to Investors (Paywall)
- Bond Investors May Find Days of Easy Money Over (Paywall)
- Investors’ Views Suggest Shift on Economy Industrial Shares Benefit From Dramatic Selloff in Consumer Issues Quarterly Investment Outlook (Paywall)
- SMART MONEY/INVESTING BOND FUNDS Fixating on Fixed Income (Paywall)
- Ginnie Mae still a big star (Paywall)
Robert Rodriguez: Newspaper cuttings
- Even Wall Streeters Don’t Know If Worst is Yet to Come
- Dow finishes unchanged as investors play it safe
- Investors are facing quandary
Robert Rodriguez: Videos
- Value Investor Bob Rodriguez on US Debt & Deficit
- Choosing the right stocks
- Winning Investment Strategy
- The Real Estate and Credit Meltdown: How Did We Get Here and Where Do We Go?