Street Stories

Mario Gabelli

Market Wizards Index: +20%
Compound annual over 9 years

Fund or affiliation

Methodology

Research/ Valuation Techniques Employed

There are certain characteristics with regard to the value of the franchise, the cash generating capabilities of the franchise, and the quality of the management. So you have qualitative and quantitative measures.
The private market value is the summation of the pieces of its business, by looking at cash, receivables, inventory, off-balance sheet assets like goodwill, franchise values, earning power. What would an industrialist pay to own it?
Private market value multiples change over time. They are a function of interest rates, capitalization structures, taxes, all of which have an indirect impact on the value of the franchise. Because of his knowledge in this area, he became a leveraged buyout guru in early ‘80s.
Examples of "catalyst" are: change in regulation, divorce or death of a founder, family block that wants a change in their tax situation.
It’s no use if a stock trades at $1 when the private market value is $2, and in ten years the stock trades at $1.5 and the private market value is still $2. What you want is the private market value grows at least faster than inflation plus a hurdle rate.

Trading Techniques Employed

You have a notion of price... within the context of "intrinsic private market value"... Mr. Market gives you opportunities to buy above... and below that price... kind of blending of a series of judgement with
Gabelli looks for a "catalyst" which will help narrow the "private market value" and the stock price to give him a rate of return within a definable time period. The "catalyst" is an important part of what pulls the investment trigger.some mechanical and arithmetic exercises.

Philosophy and beliefs

Within the framework of concentration, if you read Berkshire Hathaway’s annual report for the last 20 years, you’ll find that, if you understand a business, buying the business has less risk.
One of Gabelli’s great investment themes is the notion of time and place. You can be anywhere, anytime. The distribution of infomration is going through a major change. Some countries are getting it first time, some are finding new ways to communicate. On the copyright side, he looks for things that travel well- music, MTV, jazz, films, sports, news and entertainment.

History and other facts

Studied at Columbia 1965 under Roger Murray who co-authored Graham & Dodd’s fifth edition.
Gabelli said "if I trace the roots of Gabelli, Cooperman, Samberg and whole array of mid-’60s vintage investors, you’ll find... value investing."
Gabelli’s empire successfully bred "personalities" like Elizabeth Bramwell. He now has Howard Ward in growth, Caesar Bryan in equities, gold and metals, Hart Woodson in convertibles bond.

Performance Record

20% over 9 years: Gabelli International Limited (an offshore hedge fund) 9 full years since inception on 1 January, 1989