GAMCO Investors founder and CEO Mario Gabelli is one of those investors that proves it’s possible to beat the market even over long periods of time (the Gabelli Asset Fund has beaten the market by 2% on an annualized basis since 1986), so it’s a little surprising that he doesn’t even bother to tout his own industry in a recent Bloomberg interview.
“If I’m an individual investor and I have $100,000 I want to invest in the next five to 10 years, I’d have no problem doing what Warren Buffett recommends — buy an S&P 500 index fund,” says Gabelli, reports Lewis Braham for Bloomberg. “You’re going to earn 5 percent to 7 percent over the next 10 years. The 10-year government bond is yielding only 2.3 percent, so you could earn five percentage points higher.”
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
Gabelli focuses on steady gains over big windfalls
Instead of promoting the asset management industry, Gabelli is sticking to his guns about what he thinks is really important over the long run – stay ahead of inflation over long periods of time, don’t lose principal, and then just let compounding turn steady savings into a big chunk of money. His main suggestion for investors looking to improve their returns has nothing to do with high finance or complicated valuation metrics: consume less and save more. Even incremental increases (he gives the example of a pack of cigarettes and a latte per week) are significant if they become behavioral changes.
It’s the same mentality that gives him peace of mind despite narrowly missing out on an early investment in Google Inc (NASDAQ:GOOG) because he bid a dollar too low. But instead of worrying about the home run that he didn’t hit, he stays focused on his long term track record.
“You always have those mistakes. You never see them in the results. I think we’ve done an outstanding job,” says Gabelli.
Gabelli banking on demand for new aircrafts
Still, Gabelli is willing to give a couple of stock picks that he thinks have good long-term prospects. He points out that we have an aging fleet of aircraft that will require as many as 35,000 new planes to replenish it in the next twenty years. To take advantage of that, he is invested in Kaman Corp (NYSE:KAMN) and Precision Castparts Corp (NYSE:PCP), both of which make parts used in manufacturing airplanes, as well as engine manufacturers United Technologies Corp (NYSE:UTX) and Rolls-Royce Holdings PLC (LN:RR).