#22 -The Octogenarian

Mario Gabelli is the founder of GAMCO, a billionaire, and still working in his 80s. His workload would be punishing for someone 30 years younger, but he is committed to an in-depth research process and likes to lead from the front.

SUMMARY

Mario Gabelli is the billionaire founder of GAMCO and still managing money in his 80s. He believes in an in-depth research process, limiting his investments to the sectors he feels he understands. He believes in visiting companies – not just investees but their competitors and their whole value chain; in reading trade journals; and in monitoring the results of the sector. The day after we spoke he was due to visit a company he first visited in 1967!

GETTING INTO INVESTING

From the age of 13, Mario used to hitchhike from the Bronx to Westchester to caddy at golf clubs. Here he started to learn from market professionals. He bought his first stocks when he was a teenager but it was at Columbia Business School that he realised that he wanted to be an analyst. He took a course in security analysis taught by Professor Roger Murray, who succeeded Graham and Dodd at Columbia. He first studied accounting and philosophy at Fordham; he found the accounting helpful but is dismissive of the philosophy classes. He was an analyst covering the autos sector initially and then took on the media sector, before setting up an institutional research firm in 1977, in the middle of a bear market. The CEO of a company he visited then persuaded him to start managing money, giving him a cheque for $100,000.

INVESTMENT PHILOSOPHY

Gabelli’s investment philosophy is rooted in the principles of legendary investors Benjamin Graham and David Dodd. He is a value investor and in the 1970s, he came up with the idea of valuing businesses using the concept of private market value with a catalyst.

He used this to develop a skill in identifying companies that would get taken over, and this led to some major success in the 1980s when he became known for his bets in the media and telecom sectors.

His belief in deep industry knowledge continues – his team of analysts visit the companies they invest in, their competitors and across the whole value chain. Steve used to employ exactly the same philosophy in his hedge fund days.

Gabelli likes to lead from the front and still enjoys visiting companies today, not just in the US but around the world. The day after we spoke he was flying at 4am to Atlanta, Georgia to visit Genuine Parts, a company he first visited in 1967.

It’s hard to imagine the compounding of knowledge of a business over a 50+ year continuous period of analysis.

BOOTS ON THE GROUND

Gamco has offices across the US and around the world. The corporate HQ is in Greenwich, Connecticut, and there are US offices in Rye, New York as well as in Palm Beach, St Louis and elsewhere. Gamco also has offices internationally, in London, Shanghai, Hong Kong and in Tokyo.

They have 5 analysts in London and analysts in the US can operate from home or from offices in the network – Gabelli says that not everyone wants to be in New York City – and each morning at 8.15am they have a meeting.

The team are listed on the website and apart from one gentleman (who is 84 and joined the firm 4 years ago), they all have long tenure – the shortest experience is 15 years (two analysts including Mario’s nephew, Joseph) and the longest is Mario himself with 58 years. Gabelli likes the long tenure and having a stable team.

One speciality of the firm is conferences with the firm holding industry conferences, some of which have been going for decades – their first autos conference was almost 50 years ago.

SILICON VALLEY BANK

When we recorded, SVB was very much in the news, but Gabelli was not concerned. He recalled that in the late 1960s, Chemical Bank was a takeover target, in the late 1980s, they had the Savings and Loans crisis and in 2008, we had Lehman and the Global Financial Crisis. They own a few local banks in Florida and Georgia and they own State Street, a custodial stock, because they use the service and recognise the quality of that business, but they don’t have any real wider exposure. He clearly doesn’t see the attraction of banks.

VALUE VS GROWTH

Mario’s title other than Chairman and CEO is co-CIO Value and there is also a CIO, Growth (who has 45 years of experience). Gabelli explained it simply – his private market value with a catalyst simply doesn’t work for a stock like Meta so they needed a different approach.nephe

ABOUT MARIO GABELLI

Gabelli, the son of Italian immigrants, was born in The Bronx in 1942. He won a scholarship and graduated from Fordham University summa cum laude in 1965. He received his Master of Business Administration degree from Columbia Business School.

Gabelli runs Gabelli Asset Management Company Investors (GAMCO), a mutual fund and investment firm he founded in 1977. His reputation for stock-picking took off in the 1980s when he found success betting on the media and telecom sectors. He was named Morningstar’s Fund Manager of the Year in 1997 and The Institutional Investor’s Money Manager of the Year in 2010.

Gabelli and his wife Regina have signed the Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to giving back. According to Forbes magazine, Gabelli’s net worth was $1.7 billion as of December, 2022

BOOK RECOMMENDATIONS

Ever the value investor, when asked to recommend a book, Gabelli quipped 3 years of Berkshire Hathaway’s annual reports – they are free. He wasn’t joking. He recommends Merger Masters, a book on the art of arbitrage, which he published. He also recommends Security Analysis by Graham & Dodd.

HOW STEVE KNOWS THE GUESTS

Steve was asked to interview Mario in 2021 for Real Vision and he was delighted when Marion agreed to come on the podcast as one of the few investors who experienced the 1970s and are still investing today. Steve is looking forward to meeting Mario in person in Omaha, Mario having invited Steve to attend his conference and the Berkshire AGM.