On a terribly cold winter day I meet Mario Gabelli, Chairman of GAMCO Investors, at the Columbus Club in the Upper East Side of Manhattan. Gabelli is just back from Texas where he went to visit several companies and meet clients.   He is wearing a navy blue suit and a pale blue sweater.   Later he is going to join a group of money managers and financial analysts for their annual meeting.   His approach is friendly and calm. The latest “bear sessions” of the market don’t seem to affect him at all.  He will say many times during our interview, “The market fluctuates, it goes up, down and up again.   But we should look at it in the long term.”

Mario, can you describe your activity?

Our company is in the New York Stock Exchange since 1977.   We manage forty seven billion dollars and 97% of that money is in the equity market.   Twenty one billion is in separate managed accounts for companies like Nestlé and Verizon, or colleges and unions. One billion is in hedge funds.   Twenty five billion is in mutual funds divided into thirty different styles.   For instance, $3.7 billion are Gabelli Asset funds.

How do you manage all the funds?

We have forty analysts and twenty portfolio managers.   I personally help to train some of them; and I am the only manager on small cap.

You started your career as an analyst?

Yes, in automobile companies or conglomerates like Gulf and Western or ITT.   Then I began analysing movie and entertainment companies.

What is your methodology?

When I went to Colombia graduate school of business there were professors like Graham and Dodd, who wrote, in 1934, a book on how to analyse stocks.   In 1965/66 I took a course taught by Professor Roger Murray.  I learned how to look at a business and to figure out why I should or should not buy the stock.   This is what GAMCO does 80% of the time.   Warren Buffet went to the same school, and has more or less the same values, but he doesn’t have to report to customers anymore because he has a closed system.

What are your parameters to buy a stock?

Understand the company, the industry it works in and how much we would pay if we wanted the buy the company.  What is the private market value?  At what price do I want to buy the stock? And then we decide to buy, or not to buy, the share.

The market is bullish since years.  Is it going to continue?

When I joined Wall Street in the 60’s the Dow Jones Index was more or less 1,000.  When I started my companies in 1977 the Dow Jones was still 1,000, and then went down to 500 to 600.   It started going back up in 1982 and today it is 16,200.   The question is what it will do in the next 20 years. I believe that in the year to come we will go up 5%.

But what can go wrong?

Everything can go wrong.   One day we will be 10 billion people.  We will certainly have more inflation.   The US economy will grow two and a half to three percent. If inflation picks up Treasuries will have higher returns.  I want to add that we have to consider the psychology of the market, which is not very easy to predict.   We have to find companies that have earning power, and consider technology changes.   Many businesses are not around anymore and many new businesses spring up.

What kind of companies are you investing in?

Among the US companies we like American technology producing oil and gas from shale.  For instance I picked National Fuel and Gas.  They own an enormous amount of land from West Virginia to the Canadian border.  There are more and more people converting to gas but of course shale requires an important environmental attention as well as significant amounts of water; and the gas business is dependent on the geopolitical situation of the world.  National Fuel Gas Co shares which are worth now

$70 will be $100 three years from now, and they pay nice dividends.   Another company in which we invested is Viacom, who operate in the entertainment field with a good ability for content.   For instance they own Paramount Studios.  Of course there is competition, not all the shows or series will have the same success, but nevertheless they seem to be very strong.  The share value is $80.   We think it may go up to $120 or $140 in four years.   We also are invested in Weatherford.    The stock value is very low, $14, because of many mistakes including mismanagement, but we believe that they have very advanced and specific technology.  It may be a risk but we think the stock can go up to $28 in three years’ time.

In what sectors are you mainly invested?

We have a considerable investment in American Express and a smaller investment in Visa and MasterCard.   We still believe that, unless some religious extremists take over the world, people will keep on drinking.   Therefore we follow beverages brands like Diageo, Campari and Pernod.   Considering how much China, India and other Far-Eastern countries are increasing their travelling needs we believe in companies like Boeing and Airbus, and smaller companies who produce parts for them.    We find interesting the cyber-security sector and cable network delivery.   In particular we own shares of Cablevision.   They are worth $16 and should go up to $22.  Outside of shares we prefer liquidity to bonds.

But how is the economy in general?

I believe that the US economy will be OK, as much as Northern Europe and Northern Italy.   Around the world the German economy is improving; the Bank of Japan Governor is following the Fed’s policy, as well as the European Central Bank President Mario Draghi; President Xi Jinping is making positive changes in China.

But how is the market going now?

Markets, as I say all the time, are floating, and we look at it on the long term.   Now you have to excuse me, because I am very late for my next meeting and people are waiting for me.


New York

January 22nd, 2014.