An interview with billionaire investor and founder of GAMCO Investors, Mario Gabelli. In this interview, Mario discusses his approach to value investing and explains what his favorite investments are and why. Mario also talks about clients, BREXIT and interest rates.
Q2 hedge fund letters, conference, scoops etc
Billionaire Mario Gabelli: Value Investing And Explanations Of His Favorite Investments
Transcript
Can you guys want to sit down because there is a widespread German magazine. Tell them what you do.
So I. Once it comes from them another possible complication it's a turn around. So they have access pretty nice actually haha its finances don't matter. Several legacy.
Sites. These are three individuals that are in college. Oh nothing Nazia about college and they are here for the summer sorry. Just think yes I'm interested. You will ask interesting questions and occasionally any feedback though they'll get the answers. Okay okay let's do it.
What makes a great value investor. What are the criteria you would say are necessary. Character What do you need to be a great value.
So I think one of the elements is patience. Secondly you do have to understand that when we buy shares of stock we're buying a piece of business. So what is the business worth. From my point of view I have an accounting background and a philosophy minor. But then when I went into graduate school I had to finance in particular security analysis I was trained in the Graham and Dodd methodology of valuing security. You gathered the data that as you look at all the public information you then we as a firm put it together by raising it. Then we project that we interpret and then we communicate so we called the gate but Gappah approach GAAP I see approach to investing. We try to find companies now back about them about 70 to 80 years ago. You would try to find a company where you had a million shares outstanding selling at ten dollars but they had cash receivables of twelve dollars. It was basically finding a company low in the public markets below the net current value of their assets. That is very hard to do today. The markets have been reasonably Caldow so you then try to find other businesses where you do this work. The second thing that's important other than patients is a cumulating knowledge of industries over an extended period of time. So by following the auto industry as I've done for 40 years or 50 years and the farm equipment industry and the entertainment business you can adopt that change quicker and if the stock market which we callMr. Market comes down as it did on Friday and today it's because of Brexit. You can see what what companies make an interest the opportunity of a weak enough and then how much time do you have though. So those are kind of the elements.
And today even if you find something to look well you mostly even if there's a gap of 20 percent it's hard to make that 20 percent right. It's liquidating the company. What I laid out the reason.
Right. Well there's a there are elements. So what we call the private market value would a catalyst because we would like to harvest and narrow the spread between the public price of a security what you can buy a company and what it would sell to a private equity or a strategic that is a corporate buyer. So in that framework we don't necessarily look at book Bad. We look at what we call what multiple of cash flow minus capital expenditures even the minus capital expenditures which someone paid to own the business. How quickly will that even grow. How is it effected by inflation deflation. Is it subscription revenues or is it a transaction.
