Mario Gabelli

Mario Joseph Gabelli  was born June 19, 1942. His childhood and youth in the Bronx, where he attended the first elementary school, then a private Jesuit school for boys at Fordham University. In his spare time, Mario learned, reaching out to ride, rode in a northern suburb of New York, in Westchester County, where the moonlighting as Cuddy (porters clubs and other golf equipment) in the leading golf clubs such as Winged Foot and Sunningdale. There he met many people who have achieved success in life, and these people often talked about investing in stocks. Later Gabelli told me that even at that time to read the market reports for their own pleasure, and bought his first shares when he was only 13 years old.

After school, Gabelli received a scholarship and enrolled in college at Fordham University. There he stood out not only the hair, which in those days was still a reddish color, but a desperate and enterprising. He was always ready the next get rich quick scheme, like the sale of electric pocket flashlight from the trunk of own car at a time when the streets and shop windows were poorly lit.

After graduating from college with honors and becoming a bachelor, Gabelli continued his studies as a graduate student in the School of Business at Columbia University, where in mid-1960. seriously carried away by ideas of investing in the stock price. This is not surprising, given that Gabelli studied with Roger Murray (Roger Murray), a well-known advocate of monetary investment and co-author of the fifth edition of “Securities Analysis” – an investment the “Bible”, created by Benjamin Graham (Benjamin Graham) and David Dodd (David Dodd ) in 1934. It is worth noting that among classmates Gabelli, also lived in the Bronx and in turn got a ride each other into cars, were Leon Cooperman (Leon Cooperman), who now heads the hedge fund Omega Advisors, and Art Semberg (Art Samberg), president of Pequot Capital Management .

He holds a MBA (Master of Business Administration), Gabelli in 1967, began his investment career, sitting as an analyst in the firm Loeb Rhodes, which provides brokerage and investment banking services. His responsibilities include analysis of the shares in such industries as automotive and agricultural equipment, and subsequently the media, television and radio broadcasting. Predecessor Gabelli in Loeb Rhodes was Michael Steinhardt (Michael Steinhardt), who later became a successful hedge fund managers. In his typical fashion flaunt Mario joked that “replaced thin research folders Steinhardt at his fat. In 1975, Gabelli went to work in a small research company William D. Witter, which over time merged with Drexel Burnham.

Being engaged in the analysis of shares, Gabelli put into practice the theory of value investing, which he had taught at Columbia University. He estimated the company is not for profit, and for cash flow, analyzing them in minute detail, in order to calculate the value of what he called its own market value (private market value, PMV). This term means the price that a potential buyer would be willing to pay for the company in case its absorption. The method of assessing its own market value of companies was widespread in 1980. with increasing the popularity of buy-back transactions of companies using borrowed funds, so-called LBO. Used in this calculation is often different from the standard way of measuring the value of public companies.

Idea Gabelli was based on the main principle of the theory of Graham and Dodd is to find shares traded below their intrinsic value (intrinsic value), ie value, calculated on the basis of the financial condition of the company. Gabelli also borrowed from billionaire investor Warren Buffett (Warren Buffett) the idea of adding bonuses when evaluating the shares in a more or less large stake. Own contribution by the idea summed up in his characteristically throw slogan: “Graham + Dodd + Buffett = Gabelli.” He also considers itself the inventor of the term “catalyst” in relation to the value investing. Gabelli even patented a method he created under the name “Gabelli Private Market Value with a Catalyst Methodology” (Gabelli methodology – the calculation of its own market value in view of the catalysts).

In 1976, Gabelli first opened his own firm called Gabelli & Company, Inc. The firm provides services to a broker-dealer, using a borrowed funds, and money that Gabelli has accumulated, leading to its own trading account. The following year the company was created to manage client assets, called Gabelli Investors, Inc. (later it was renamed GAMCO Investors). By 1981, managed by GAMCO was 81, while the total amount of funds in the accounts reached about $ 33 million, despite the instability of the economic situation in the U.S. and stagnation of the stock market in late 1970 – early 1980’s. The company Gabelli each year brings clients income. By mid-1980. client assets, is administered by Gabelli, is more than $ 350 million, and annual rate of return, calculated by the formula of compound interest, reached more than 35%.

If many investors sought to invest in growth companies at the beginning of her life, then Gabelli, in contrast, preferred to enrich themselves at the time of her departure from the scene. His favorite approach was to invest or recommend investment in companies that are targeted for acquisition or privatized. Company Gabelli independently undertake all analytical work, as a rule, trying to find companies that can become objects of transactions LBO (redemption of the company using borrowed funds). Characteristic features of these firms can be a large amount of cash, the underlying assets such as real estate, or a large block of shares owned by the founder of the company, not having children. Gabelli also led the search for promising companies in industries with large cash flow and low probability of new strong competitors.

Once having found such a company, he was ready to wait for years until its shares do not grow in value. So, he began to invest in Cowles Communications, Inc. in 1977, when the price of its shares was $ 14, and eventually became its largest shareholder. In 1984, when the firm (now called Cowles Media Co.) Was privatized, the price of its shares was $ 46, which brought customers Gabelli total profit of $ 33 million

Another extremely successful solution was to invest in shipbuilding company Chris Craft, which, through its unit BHC Communications, Inc. led operations in the area of broadcasting. In the 1980’s. BHC Communications has become one of the leading providers of independent television stations in the U.S., and its profit before tax for the six-year period has increased nearly sixfold. In 2001, the BHC was bought by media giant News Corp. (NWS). Among the successful transactions Gabelli also include investments in the company LIN Broadcasting, sold McCaw Cellular Communications in 1990.

Not knowing tired Gabelli is visited annually by approximately fifty companies to gather information, meet with leaders of more than a hundred companies, discussing investment ideas with other portfolio managers and have read about 20 specialized magazines, two or three newspapers and a large number of sectoral reviews and corporate reports. He also wrote analytical notes to customers – professional investors who use its services broker, asset manager, etc. In 1986, he said in an interview, Jerry Egerton (Jerry Edgerton) Journal of Money, that “reads the annual reports instead of novels.” Narrowly managing a focused portfolio that includes major investments in a small number of companies, Gabelli was able to influence management decisions of companies.

In the period between 1978 and 1985. portfolios, is administered by Gabelli, a year ahead in terms of profitability index Standard & Poor’s 500, and in five of those years, their results exceeded the results of the index more than doubled. From 1977 to 1988. average annual growth rate of assets GAMCO Investors, calculated by the formula of compound interest, amounted to 28%. Only a very small number of asset managers could achieve more in the same period. GAMCO Investors never finish the year with losses, and only up to two years failed to achieve its goal of Gabelli – 10-percent return after taxes and adjusted for inflation. In 1986, the assets of GAMCO Investors in the shares, together with cash invested by pension funds reached $ 1.6 billion

In March 1986, nine years after the foundation of the company for asset management, Gabelli introduced its first mutual fund, called Gabelli Asset Fund. On the establishment of mutual fund it inspired one of his idols – the famous Peter Lynch (Peter Lynch), fund manager of Fidelity Magellan (by the way, like Gabelli, Lynch became interested in markets, laboring as Cuddy on the golf course). Gabelli Asset Fund was a fund without a load, that is, its shares were sold without a broker’s commission. The minimum initial investment in the fund was set at $ 25000. Later the amount was reduced significantly and now stands at $ 1000, and for individual retirement accounts, at least non-existent. For Gabelli Asset Fund later followed Gabelli Equity Trust – closed-end fund, which at that time was the largest fund, whose shares are traded on the New York Stock Exchange. By the end of 1988 the company consisted of three Gabelli mutual fund with total assets of $ 650 million, with two of them, he drove himself.

Calculate the moment of entering the industry of mutual funds was absolutely accurate. Gabelli not only took off on a wave of bull market, but cumel take a sharp increase in the activity of financial media. Quite quickly realized that his unique and charismatic nature as if set for participation in the telecast, he began to actively promote itself, thereby increasing the popularity of its funds.

Following the 1997 stock funds in the Gabelli Asset Management Inc., Whose number has reached ten, showed an average yield of 31.7%, which was the best result among the families of U.S. mutual funds. The agency acknowledged Morningstar Gabelli, the manager of the funds in the category of American stocks. By 1998 under his company’s assets were a $ 16.3 billion in February 1999, GAMCO has become a public company, placing on the market of 6 million shares at $ 17.50 per share.

Several years later, Gabelli been accusations that his game was not very clean. Grabbing “stranglehold” of the shares of his company, he came into conflict with its first investor, Frederick Mancheski (Frederick Mancheski) and David Perlmatterom (David Perlmutter), who in 1977 invested in his company $ 75000. In 2003, they sued, arguing that the value of their investments rose to $ 100 million, and accusing Gabelli is that during the IPO, they did not receive their shares of stock. Another part of the charges related to the “looting of assets” GGCP. Investors argued that Gabelli has appointed himself inappropriately high pay in the amount of 20% of profit before tax of the holding – in addition to the huge fee for the management of GAMCO. As part of the settlement of the claim Gabelli was forced in 2006 to pay its investors about $ 100 million

This was not the only complaint, which raised the question of compliance Gabelli business ethics. Around the same period Gabelli had to face trial by the Ministry of Justice and Federal Communications Commission. The latter accused him of fraudulent manipulation of the auction for licenses to provide cellular services to small businesses.

Gabelli says that not only money is the motivation of his intense activity. According to him, when he started, this money has been very strong motivation, but when he became what is now the situation has changed. Now the real motive for him was the opportunity to give money. Leon Cooperman, a friend of Gabelli since Columbia University, said that Mario – the most generous person, what you have ever known. Charitable purposes for which Gabelli, according to Cooperman, spending millions, very diverse, but his main passion is education. Of course, this is not without his usual bravado: many of the donations have the name of the donor. Among them School of Business Gabelli (Gabelli School of Business) at Roger Williams University in Rhode Island and Hall Gabelli (Gabelli Hall) at Boston College.

Gabelli managed to win the confidence of a number of leaders of the largest companies in the world. In 2001, the head of Microsoft (MSFT), and the world’s richest man, Bill Gates (Bill Gates) bought through his private investment firm Cascade GAMCO convertible promissory note of $ 100 million Chairman of the Board of Directors of Viacom (VIA) Summer Redstone (Sumner Redstone) recognizes that consults with Gabelli on the media industry. According to him, Gabelli was the first who recognized the power of cable television.

Gabelli has always sought to make his name synonymous with the names of prophets of the ideas of value investing. He and his company, GAMCO Investors have established an award for special achievement in terms of value investing, named in honor of his favorite professors at Columbia University Business School as the “Award of value investing named Graham, Dodd, Murray, and Greenwald.” Presentation of this award, known in the investment world as the “Gabelli Prize” takes place at the client’s annual symposium GAMCO.

In May 2006, Gabelli Fortune magazine referred to the documents that compare the profitability of the investment firm Geico Equities, controlled by Warren Buffett (Warren Buffett) to yield an index Standard & Poor’s 500 for the period from 1980 to 2004. Separate column represents the performance of several GAMCO accounts for each year, proving that their average annual yield over the same period amounted to 19,8% against 20,3% for Geico. I Do Gabelli prove that is on par with Buffett? He called Buffett’s “unique event” and “The greatest value investors” with false modesty, saying that it can not compare myself with him. And then he adds: “What are we to the public market, so Buffett is for the private market.”

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