Mario Gabelli Reddit AMA Summary

  • Reading time:10 mins read

Mario Gabelli did an AMA on Reddit a while back. But I’ve compiled and sorted it into categories for easier reading.
I thought some people might be intimidated and confused by Reddit threads, so hopefully, by sorting and categorizing in a post, someone might find this useful.

I haven’t included all questions and answers from the post. Just pulled the ones I found most interesting and insightful.
Only edits I’ll do will be for capitalization and punctualization purposes.

Hello Reddit!

I’m Mario Gabelli, founder, Chairman and CEO of GAMCO Investors, Inc. (NYSE: GBL). Native of The Bronx, my Undergraduate degree is from Fordham School of Business and my MBA from Columbia Business School. I started as a sell side analyst at Loeb Rhoades in 1962. I established Gabelli Asset Management in 1977 and unfortunately, took it public in 1999.

I was credited by Columbia Business School with adding the idea of Private Market Value (PMV) with a CatalystTM to value investing philosophy.

Mario Gabelli Reddit AMA Introduction.

Lee Cooperman talks about the car rides he shared with you while you were both students at Columbia and how he learned more about investing during those rides than he did in the classroom. How valuable was it to surround yourself with people of similar ambitions, and how do you suggest we align our relationships and private life to our ambitions? How did you identify people in your earlier years to be ones that you wanted to learn and grow with?

Pure luck and the fact that there was only one pay phone at Columbia and we had to arm wrestle over who got to call their broker first. Lee Cooperman and Art Samberg were willing to risk their lives while I was the driver. Particularly on snowy or icy days. Somehow, the passion for investing was the fundamental glue that kept us together. So find those that are passionate about what you care for in business.

You often speak about hiring PhDs (poor-hungry-driven), have you found that the investment industry overlooks many students who do not come from Harvard, Princeton, Yale, etc.? Have driven students coming from so called non-target schools added as much value to your firm as students coming from target schools? (I will be starting university this fall at a decent school but not Ivy League caliber).

Great question! and great insight!

We have 240 individuals in our firm and they represent 140 undergraduates from 140 undergraduate schools around the world.

Regrettably – many will call, but few will be chosen.

So it’s not only what you’ve accomplished but also how effective you are in your time spent doing this.

I am 18 years old and an aspiring value fund manager; I read all of Ben Graham’s work along with countless other investment books (your firm’s book on arbitrage included) and I am also currently managing a small investment account. Given this, what would be your best piece of advice for someone in my position?

Great question, I would say i’m delighted you are buying stocks. I don’t know your background but my advice is that you work 5 to 9 while others work 9 to 5.

So apart from this (taking GAMCO public) what other decisions in life you regret now?

I don’t regret being born in the bronx and I wish everyone else was. In answer to your question- not starting more aggressively in the 70’s investing in hedge funds when Steinhardt suggested I do so is something I do regret.

What piece of advice would you give a CFA Level 3 candidate who wants to go from working at a pension fund to a front office type of role?

Continue reading annual reports in an industry in which you want to dominate the knowledge of. Or read all the annual reports and figure out which micro cap company you’d want to take control of. Concurrently, start your own investment company and put yourself in the front office in the beginning.

How much does big data factor into your analyses and decisions?

We have been using data from a variety of sources for the last 50 years following in the tradition of Graham and Dodd. In the early stages we used a abacus and 13 column spread sheet and green eye shades. ha ha.
Today we use google and hit a send button.

How do you deal with uncertainty about when interest rates will rise in your valuations of companies when looking at long term investments (5 year or more discounted cash flows)

“Plus ca change, plus c’est la meme chose.” I am in a camp that take great discomfort in the belief that current valuations will exist 5-10 yrs from now- that is, multiples of EBIDTA minus maintenance capex. therefore an ideal investment is to have companies in your portfolio that have pricing power and that are bought at a reasonable multiple.

In your opinion is it better to buy cheap companies or good companies for a small investor?

All investors are the same. You will have companies that have pricing power that will benefit from the growing U.S.economy and will do as well as they have in the past quarter century in the next quarter century.

Where do you see the future of value investing going forward? And how does it differ from it was in the past?

Value investing will continue to encompass growth and we’ll understand more the value of the service sector of the economy. We’ll use the same guiding principles to avoid over-paying for a company’s intrinsic value and lose less during market manias.

If you did not start GAMCO, what would you have done instead?

I would have been a movie producer or as Dan, who is sitting next me me yelled out, “joined the PGA tour.”

What is your favorite part of the job?

Getting up at 4AM and reading the Financial Times, BBC News, stuff that is sent to me by Henry van der Ebb and about stocks going down.

What do you see as the future of active equity management in 15-20 years?

The notion of a.i. momo investing, robo advisers is more than welcomed. The notion of understanding how a business functions, and individuals provide stewardship of OPMs will remain unchanged.
Not much else will change over the next 100 years.

Can you walk us through what a typical day looked for you today and how has your daily routine changed over the last 10/20 years?

The information flow has gone from reading newspapers and watching the Dow Jones news tape to gathering information from our research teams in Tokyo, Shanghai, London, Milan, and our teammates in the US. Secondly, before the taking down of the Berlin wall in November of 1989, our focus was strictly domestic. Today we follow and invest in companies in which we have a core competency on a global basis.

While I am well familiar with your career as a value investor, given the size and the number of products that you have, how are you able to still be a “value investor” in any meaningful way compared to your early career? Aren’t you forced to buy pretty much everything?

We knew a lot about a little. Today we are blessed by having 60 teammates that provide input and indeed make investment decisions on areas such as growth, media and entertainment, content and connectivity, pet parents, food of all nations, gold, an so on.
I am their cheerleader.

Are you incorporating alternative data into your investment research process? If so, how?

Yes – old fashioned research reports.
Our firm’s research process is GAPIC. Gather. Array. Project. Interpret. Communicate.

As an individual investor, how do i start to get familiar with a new industry (Cable,Banking, Automobile) and expand my circle of competence?

Start by obtaining data on all public companies in a sector. For example, cable television. Secondly, find any “public offerings” this will help with the jargon. Third, contact the local CFA chapter and ask for any data they have. Fourth, contact and accounting form that audits a cable company and see if they will share information. I would also contact the industry trade association(s).

Who are some investors you admire?

Warren Buffett, Charlie Munger, Marty Whitman, Seth Glickenhaus, John L. Loeb, Roy Neuberger, Sam Zell—- Leon Cooperman, Chuck Royce… and I could continue

Want some more AMA’s?