GuruFocus had the pleasure of hosting a presentation with James Roumell, the founder and president of Roumell Asset Management.
Roumell entered the securities industry in 1986. Before founding Roumell Asset Management in 1998, he was a registered principal at Raymond James Financial Services Inc.
He is a frequent contributor to Manual of Ideas Global and has been featured in such publications as Barron's, Kiplinger's, Value Investor Insight, Financial Planning Magazine and The Washington Post. He is listed and quoted in "The Art of Value Investing: How the World's Best Investors Beat the Market."
Roumell was selected to participate in, and won, two consecutive Wall Street Journal stock picking contests in 2001 and 2002. He is a board member and serves on the investment committee of Amalgamated Casualty Insurance Company.
He is a graduate of Wayne State University in Detroit, Michigan.
Watch the full presentation here:
Key takeaways
Roumell kicked off his presentation with a brief look at his early life growing up in Detroit and then explained how he started his career as a traditional stock broker in 1988 with Raymond James. It was there that his mentor, the late Marty Whitman, bought a few securities he had recommended, giving him a "great amount of confidence" in his approach. Roumell also noted that Whitman agreed to be an advisor to his firm when he founded it in 1998 and was instrumental in getting it off the ground.
He later went on to highlight some other key influencers to his firm's strategy, which include Whitman, Walter Schloss, Irving Kahn and Seth Klarman (Trades, Portfolio).
The investor noted the firm is "opportunistic" with a focus on a concentrated number of holdings. The firm is more company-specific and does not take macroeconomic conditions into consideration. Rather than following the crowd into popular securities, Roumell said his firm looks for companies that are overlooked, out of favor and misunderstood. He also emphasized they are not interested in finding great businesses or compounders because they feel it is a type of investing that lends itself to indexing.
Ultimately, the defining question Roumell and his team are looking to answer is whether or not they would be willing to take a company private.
Roumell also highlighted the types of "edge" the firm looks for when conducting their due diligence, which include an informational edge and a behavioral edge. They also look for companies with good assets, strong balance sheets, good management teams, have multiple businesses and are trading at a discount.
Stocks
The first stock Roumell examined in detail was GSI Technology Inc. (GSIT), a chipmaker that is currently the firm's largest holding. The company is debt-free, cash-rich and has a legacy business. The investor highlighted its new Gemini artificial intelligence chips, which is a very powerful memory-centric associative processing unit designed to deliver performance advantages for diverse search applications.
The second stock Roumell discussed was Dundee Precious Metals Inc. (TXS:DPM), which is a Canadian miner that has two large mines in Bulgaria. Like GSI, it is also cash-rich and has no debt.
Questions
The first question Roumell answered was in regard to reducing average cost. He said the firm doesn't typically average down until there is at least a 15% drop, but if the discount drops materially then the position size will increase. In other words, if the analysis hasn't changed, but the stock drops, your position size is a reflection of the level of discount you have.
Another question dealt with how to determine if an investment is not working out. Roumell shared that they recently sold a security for about they same price they bought it. Even though they had spoken to someone who had toured the company's operations and had received other good feedback, it didn't match up to their own observations and analysis, so they sold. Roumell said that if he doesn't always feel good about a discounted security, he doesn't want to own it.
Finally, Roumell shared some advice for individuals who are just starting on their investment journey. He said to focus on self-reflection, understanding who you are and where your talents are most likely to be realized. He cautioned against running against your grain when it comes to finding your investment niche as it will be counterproductive. Roumell also said patience is important.
Disclosure: No positions.
Read more here:
- 4 Lucky Irish Companies to Consider for St. Patrick's Day
- Howard Marks Releases Memo: '2020 in Review'
- Jana Partners Further Pares Down Top Holding Perspecta
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
