Mario Gabelli, GAMCO Investors CEO & CIO, reveals the best way to find value investments as the “fiscal cliff” approaches.
Charlie Munger: Invert And Use “Disconfirming Evidence”
Charlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More
i lost them all a long time ago. in that framework, here’s acompany that was plodding along. they’re buying back stocks,things are starting to get brighter. and so what’s the value of thecompany if someone takes it up? an analyst whose name i forgot on the conference call, the earnings release just yesterday asked them a question. are you going to stop justbuying back stock are you going to do something significant?are you going to split the company into three parts? how do we make money in the market? i thought there was a third reason for patterson dental. well, they have stuff like products for aging for rehab. you need knees, you need a hip. they do that too. no, they sell the components that you go in and get supplies. so if you want to do a therapy. when you say companion pets, you mean cats and dogs. well, we leave that out. i talked to some of my fish. you do a lot. i do. but 80 million cats and 80 million dogs, that’s 160 million of those. that’s pretty significant. it is.believe me. so as a result of that. and you’re spending more money and the growth rate of that market. these are hidden markets. we like to talk about housing, autos, we can talk about niches, that’s an interesting company, you have takeout company there. they’re a conduit for inflation because they pass through. now, short-term, you and i are let’s say dentists. we sit down with our accountant and say how do we spend money?should we buy that piece of equipment today, or is theaccountant going to say, look, your taxes are going to be higher next year? so a lot of the thought process is going on.yesterday, bernanke said he wrote his ph.d. thesis on theelement of uncertainty in investment spending. that was interesting. he had 150-page thesis, this was one part of the three parts. there’s an element of that. and short-term there’s probably some difficulty in doing that. so start adding to products that cater to the companion pet market to the dental market, to the aging process. this is just a sample of that, joe.did you come up with this? or did someone in your shop comeup to you? no, patterson dental started following this 10, 12 years ago. and owned it off and on since? yeah, and we don’t own a lot. we probably own 1.5 million shares, bought some yesterday, good news that the stock dropped $3. okay. and we’d like to have it cheaper. all right. what else? as an example, let’s go back and look at the world. how do you make money? spinoffs, split-ups, liquidations, mergers andacquisitions. a company like sycamore. sycamore was worth $20 billion ten years ago because everybody said it’s got the digital revolution. the stock is liquidating the company. the stock’s down $2.76. okay. that’s — scmr. you remember it well, don’t you? i know, painfully. in any event, let’s look at spinoffs, cable vision, they gave you madison square garden. he’s splitting up his company and spending money. one of the things he did, bought the yankees. putting valuation — not theyankees, the s network. like your content, you’re terrific, you guys are worth a lot of money, 12 times ebitda. we are? you are. and basically you know what cnbc earns for the new owners. you know what our ebitda number is — $240 million, i don’t knowwhat it is. what about squawk box. i don’t want any insideinformation here. so murdoch is going to buy you now. when we go to break, i’m going to do this — basically, what does thatmean for msg? when they have the msg network, it reaffirms what the value is of these cable networks and the value of the sports franchise. somebody bought the dodgers for $2 billion plus, did they buy it for the team or for the — they bought that for the — vanity. that was a vanity. just do the math. in addition to that — were you wrong on that too? i standby the vanity issue.you think it was too much? mario doesn’t seem to think — that was a good deal? they used insurance policies to buy it. good point. there’s no question it attracts certain types of dynamics.the brooklyn nets is a money? or is it a way to get the value of the content by capturing the distribution. because if you get $1 a month for a subscriber watching the knicks and gets back on the nhl, national hockey league, you get incremental revenues.the spinoff was a way to attract attention. is somebody going to buy the channel? the ones — walking dead, right? yeah, of course. and madmen. some people say spinoffs are shuffling of the paper. do you disagree? well, it’s a fundamental issue with regards to capitalism. and that is should the ceo and the board and the shareholders who elect these individuals allow companies to move assets to the highest form? john malone constantly spins off things shuffling paper. looking to not only grow intrinsic value, but allowing it to surface. if you just bought a basket of securities that dr. malone had over the years, you’d have compounded assets at about a 15% the last 20 to 30 years. buffett does something else, buys and holds. irene rosenfeld, i said she’s going to buy cadbury, she took it, put it into a package, spun off kraft. mondelez is a fantastic asset.another example, hillshire, sarah lee, we talked about thatspinning off. look at the pieces. what are the elements that areworth? hillshire is a company 120 million shares, the stock’saround $25, $3 billion market cap, basically the company sellsprotein for breakfast, jimmy dean sausages, the sausagecategory, how big is it? might be a little fat — lunch meat. joe –well, it’s sausage. i want it. i eat it, i want it. i’m telling you it’s not all protein. this is good. hot dogs, joe. just sort of in a trance.it’s sort of a relief, once in a while, to have mario come and talk about stocks. bottom line. well, that’s what the stock market is.it’s a collection of stocks as opposed to buying an etf. do you want to buy a business and get rich? or do you want to trade?in addition to that, what are your taxes, joe? oh, now we’re going to politics. no, we won’t. no, we’re not. it’s called capital gains,retained earnings, how do you maintain wealth in anenvironment? how do you create wealth? how do you create retirement? how do you fund what a college needs to pay for tuition for incoming students? how do they — buffett and taxes, i don’t think those two words go together. he’s never paid a tax, has he? he’s very good. he’s very good at minimizing tax — but the concept of a deferred tax is an engine of growth, capitalism, very fundamental thing. we’ve got 12 times ebitda. that’s why we’ve got to sell these commercials, right? thanks, mario.