Q4 Investor Audibles: Tactile Fund, Hayden Capital, Robotti Value Investors

Episode Summary

Executive Summary: The transcript reviews three year-end investor letters that all emphasize a major rotation away from expensive U.S. mega-cap tech toward real assets, international markets, and businesses with durable moats. Dave Waters’ Tactile Fund argues that inflation, dollar weakness, and AI threaten intangible/software-heavy models, favoring physical assets. Hayden Capital sees AI disruption creating opportunities in software, digital platforms, and network businesses at lower valuations. Bob Robati’s letter focuses on market underreaction to cyclical recoveries, especially in banks, energy, housing, gold, and other scarcer assets.

Main Topics: Tactile Fund: real assets vs. intangible risk (Priority: 5/5): Dave Waters frames the fund around two long-term threats: currency debasement/high inflation and AI disruption of software. He argues physical assets like railroads, farms, mineral resources, and infrastructure better preserve value and pricing power. AI as disruption to software economics (Priority: 5/5): Hayden Capital argues AI is forcing a revaluation of software, but not necessarily killing the sector. The firm sees opportunities in incumbents that can adapt, especially where value comes from trust, workflows, and services rather than code alone. International markets and valuation rotation (Priority: 4/5): Both Tactile and Hayden emphasize that 2025 saw international markets outperform the U.S., reflecting changing views on dollar strength, U.S. stability, and stretched U.S. valuations. Network effects and digital platforms remain defensible (Priority: 4/5): Hayden argues online marketplaces, gaming, e-commerce, and travel platforms have moats rooted in scale, trust, data, logistics, and user relationships that AI cannot quickly replicate. Cyclical recovery and market mispricing (Priority: 5/5): Bob Robati’s letter focuses on industries that look broken but are improving structurally after underinvestment, consolidation, and discipline. He sees opportunity where market narratives lag improving fundamentals. Physical-world bottlenecks and industrial renaissance (Priority: 4/5): Robati highlights energy, housing, offshore services, and industrials as beneficiaries of supply constraints, low-cost U.S. energy, and rising physical demand created by digital progress.

Key Arguments: Physical assets with pricing power are more resilient than software or intangible IP in a world of dollar weakness and inflation. AI may commoditize parts of software, but many software businesses still create value through service, trust, compliance, maintenance, and workflow integration. Market valuations are being reset by fear around AI, creating opportunities for selective stock pickers. International equities have become more attractive as U.S. exceptionalism and reserve-currency confidence are questioned. Network effects, proprietary data, logistics networks, and customer relationships are durable moats that AI cannot instantly recreate. Cyclical industries often become structurally better after downturns because consolidation and underinvestment reduce supply and improve pricing power. The market tends to overreact to narratives and policy headlines, creating sharp dislocations that disciplined investors can exploit. Long-term returns come from patience, not timing; recoveries are rarely linear and often include large interim drawdowns.

Data Points: Tactile Fund 2025 return: 20.5% - Dave Waters reports full-year performance for the inaugural fund Tactile Fund Q4 return: 4.5% - Dave Waters reports fourth-quarter performance QQQ annualized return, 2016-2025: 19% annualized - Used to illustrate decade-long tech dominance Hayden Capital Q4 return: -12.9% - Fund performance during the quarter Hayden Capital since inception: 14.8% annualized after fees - Compared with S&P 500 at 13.5% annualized Hayden portfolio geography: 42% Asia, 41% North America, 16% Latin America, remainder cash - Current portfolio allocation Korea COSPI annual return: +76% - Cited as strongest major market in 2025 MSCI Emerging Markets outperformance vs S&P 500: ~16% - International/emerging markets outperformed U.S. equities MSCI World ex-USA return: +32% - Bob Robati cites broad international outperformance S&P total return in 2025: +17.4% - Used as comparison for ex-U.S. equities Nikkei 225 annual return: +26.2% - Example of Japan’s revaluation European banks index return: +67% - Illustrates cyclical re-rating in banks Tidewater buyback average price: ~$39 - Bob notes company repurchased shares during volatility Tidewater stock move: above $100 - Used to show valuation swing and market mood shifts C Limited valuation: 7x 2028 EBITDA - Hayden argues the selloff looks excessive relative to growth C Limited growth: 30% year-over-year growth - Used to support bearish overreaction thesis ServiceNow growth: 21% year-over-year - Example that AI has not yet harmed software fundamentals Atlassian growth: 23% year-over-year - Another example of still-strong software growth GitLab usage growth: 35-45% year-over-year - AI-generated code increasing testing/CI demand GitLab revenue growth: 25% - Shows monetization lag vs usage/value creation

Pivotal Quotes: "What if AI eats software?" — Dave Waters: He uses this question to frame the investment risk to intangible, software-heavy businesses "Maybe 20% of a software company’s value is in the code itself. The other 80% is a customer service business." — Fred Liu: He argues software moats come from services, trust, and ongoing support rather than code alone "in economics, things take longer to happen than you think they will, and then they happen faster than you thought they could" — Bob Robati: He uses Dornbusch’s observation to explain delayed market recognition and sudden re-ratings

Implications: The letters suggest a broad regime shift: favor tangible assets, international exposure, and businesses with real-world moats. Investors should expect faster narrative-driven rotations, wider dispersion, and more opportunities in neglected cyclicals and adaptable incumbents.