Mario Gabelli. How to win a grand slam

Mario Gabelli. How to win a grand slam

Mario Gabelli, comparing himself to a jet fighter pilot, built a financial empire that includes an institutional brokerage firm, mutual fund management company and money management firm for advising institutional and private investors. The amazing success and his personal energy earned him the nickname Super Mario. Like Peter Lynch and some other well-known stock electors, Gabelli, who grew up in the Bronx, first became interested in the stock market, whenhe was a boy on the golf course, serving the asset management companies. After studying on scholarship at the university, "Fordham", he received an MBA from Columbia University, where he was greatly influenced professor who taught the analysis of securities in the spirit of the pedantic and conservative Benjamin Graham.

In 1967 he started his Wall Street career as an analyst in the auto parts company, "Lobe Roads" (Loeb Rhoades), then moved to the "William A. Witter" (William D. Witter). In 1977 he founded the "Gabelli Asset Management" (Gabelli Asset Management). Over time he added a couple of tricks in gremovsky approach to fundamental analysis. One of them - the introduction of the idea of ??"private market value" - ro is what could be a public company, if it was private. He likes to exclude expenses such as taxes, depreciation and interest to get more reliable data on net income and assets. Another idea presented to them - look for something called Gabelli "catalyst", an event that could raise the price of the company, such as mergers or changes in government regulation.

Gabelli, reading annual reports, as others read novels, 8 the process of creating their company, which manages assets worth more than $ 10 billion, has earned a reputation as a tireless hard workers. "It does not work for me - he says. - This is my passion. Some people collect art or go horseback riding or playing in the castles of Ireland. I like to choose the action". For this purpose, there are many days from 5 am to 9 pm, and even occur from time to time staff meetings on Sundays. Although the Gabelli and a workaholic, he also has a more frivolous side, which is reflected in the name of the fund based on global information and entertainment companies - "Gabelli Global Couch Interact poteyto Fand" (Gabelli Global Interactive Couch Potato Fund, which translated to English sounds about as the "Global Interactive Fund Gabelli couch potatoes"). With regard to his investment style, in his article "How to win a grand slam," he says, among other strategies, how to look for "catalyst."



The ancient Greek playwright Euripides said: "The best predictor of the one who guesses correctly," Every year since 1980, the magazine "Berronz" gives me the opportunity to sit down at the annual Round Table with the famous by good soothsayers, and guess what will be done in the coming year economy, markets, and some individual stocks. Now, in honor of the 75th anniversary of "Berronz" I prigasili wipe on and discuss some more investment so that in theory will enrich the reader for the next five years. This is true.

I'll start with the recognition that over the past 20 years, our annual macro-economic and market forecasts were not always correct. Fortunately for our customers and readers' Berronz "Our investment methodology is not based on accurate prediction of trends in interest rates or timing the market, and to a large extent on stock picking, and many of our elections have been quite successful.

One reason for this - a good average result in the determination of trends - we call them as catalysts that increase the market price of shares in selected industry groups. The catalyst may be a change in regulatory standards, for example, the original bill on deregulating the cable TV in 1984, which led us to a profitable investment in cable stocks. This may be a consolidation within a single industry. The struggle for the film industry assets due to the expansion of the distribution system during the 80s and early 90s, inspired us to take strong and, ultimately, a very advantageous position in the "Warner kommyunikeyshns", "MCG-Yo" and "Paramount "before they got" Time "," Matsushita "and" Viacom "respectively.

The catalysts can be, and corporate restructuring. The recent trend to assist in the implementation of shareholder value through the sale or promotion company has helped us to earn good profits for companies such as "Hampti-Dumpty," when all the king's horse and all the king's men helped break the back of the industrial conglomerates ua. Among them are "Teineko," "American brendz," "American Express", "Ai-ti-ti," and now "Hey AT & T".

As the strongest trends for the next five years we have seen an explosive growth in the international market for American goods and services, he has his roots in two important catalysts, recovery of American industry, caused by a reduction in the cost of capital and a huge increase in productivity, and the victory of world capitalism, the best symbolized by the collapse of the Berlin Wall. Resourcefulness good old Yankee has made us more than competitive with Japan and Germany. Now we are in an excellent position to win new international economic lines,

With the development of a free market economy in China and the former Soviet bloc countries, and with a rapidly growing middle class in developing countries in Latin America and the Pacific Rim, the number of new buyers in the turn of the century will be or 2,5 to 3 billion people. How you spend your money is going to this emerging international middle class? If the past is prologue - and we can learn something from looking back on the economic evolution of the great American middle class - the new world middle class will increase their consumption habits with regard to food, and if it will be possible, they buy phone services, spending money on entertainment and travel.

Investors who hold our views - the electors of shares, if you can not talk about investment trends, without naming some names. In contrast to the Round Table, where "Berronz", and our colleagues always encourage us to fill out forms with basic data for individual selected shares, and will not give accurate data on the companies mentioned in this article. I'm not going to do and relatively short-term predictions and income and cash flows. With this proviso, our sopisuyas-oriented philosophy of Graham and Dodd value, we would like to own businesses, which it says here a long time,


It is not nonsense
Let's start with Iowa, the American farmer crops, the most productive in the world. In the agricultural sense, Iowa - a work of art. Let me give you a hypothetical example. To produce one ounce of meat takes seven ounces of grains. If the consumption of chicken or pork in China has increased by one ounce per capita and Iowa would have to produce all the grain going to feed these Chinese chickens and pigs, judging from the level of gross national product in Iowa would have been among the world's richest countries the ego misses seem like a silly example. But his aim to draw attention to the huge growth potential of the production of American farmers engaged in grain and sellers and their service. Manufacturers of agricultural equipment - "John Deere", a company carrying grain transshipment centers, for example, "Archer Daniels Midland," manufacturers of irrigation equipment, such as "Lindsay menufekchuring" would become long-term beneficiaries of the increased role played to the American farmer to provide food for the world.


VYZVANIVANIE DOLLAROV
When a new international consumers will be more meat to the table, what else can make his or her life better? A major step forward will be able to call friends and family on the phone. In fact, you can argue that telecommunications is both the engine and the stimulus of the appearance of the international middle class. To compete in the global arena, businesses in developing countries need healthy stock markets are attractive to global capital. Modern telecommunication systems a prerequisite for their occurrence. As soon as an efficient telecommunications system causing the further strengthening of economic growth and development of the middle class, increasing the need for a global telephone service. Here we have to take my hat off to the evolutionary theory of time and space, Craig McCoy, who in fact gave rise to cellular phone industry. And when it comes to developing countries, it will provide wireless telecommunications services at reasonable prices.

It can be argued that telecommunications will be the fastest growing global industries in the next decade, if not longer. Consequently, long-term investors do not have to be awfully picky to make a fairly decent profits in this sector. But the snap that hit, investors, and with them the key players can maximize their profits by focusing on segments of the industry that will grow faster. Three big U.S. companies are international "Hey AT & T", "MCG Eye" and "Sprint" is actively developing strategic alliances with national and local communications networks worldwide, allowing them to dominate the international market long-distance communication. Manufacturers of telecommunications equipment, such as "Lucent" (offspring of "Eighty & T") and "Notern Telecom" will play a major role in laying the lines of global communication. Suppliers of modern cable equipment, such as "Scientific Atlanta" have great prospects for international growth, on the side of the wireless must thrive cell phone makers, such as "Motorola" and "Nokia". Particularly noteworthy is "Eyrtach", which has made a tremendous job, winning franchising joint venture cellular phones throughout Europe. Two other noteworthy investments in the field of cellular communications are "360 Kommyunikeyshns" - a local cellular derivative "Sprint" and British "Vodafone".

If you prefer a more focused approach based on "special situation", the Canadian telephone giant, "BBC-I" must win, when will sell out their sound investment in "Notern telecom" and as the deregulation of Canada catches up rest of the world. In per capita terms, the Vancouver metropolitan area has the highest concentration of Chinese expatriates in North America. It can be great "gateway" to China.


GLOBAL TELEVISION
No U.S. production does not travel more than movies and music on the record. Several years ago, the "Time Warner." Investor Relations gave us a favor, providing the film with cartoon characters, "Warner", giving a lesson on world geography dozen foreign languages. We have used this film to our annual meeting clients to illustrate global sphere of influence of the American entertainment industry. In the world there is simply no such place anywhere in American movies do not play a leading role, whether it's theater, cable or terrestrial TV. The same applies to music, look at the convergence of U.S. computer and telephone industries, and cable television industries. Also attract and overseas opportunities. Only in the past five years the number of satellite dishes in India has increased from 400,000 to 10 million. As soon as the distribution channels are expanding throughout the world, the entertainment value will increase.

Given the consolidation experienced by the film industry, there are fewer opportunities for participation. "Time Warner" - the dominant global financial services company in the field of film and in recordings. If it is assumed that her marriage to "Turner Broadcasting" will become a reality, "Time" can also become a strong international cable television company. Stock prices were constrained concerns' about debt, "Time", the result of bile relations with the "S-Es West", and uncertain prospects of giant cable television operations, "Time Warner". In this regard, investors are now not see the forest for the trees. However, we believe in the end market recognizes outstanding global position, "Time Warner" in the software entertainment industry.

Other beneficiaries of a favorable long-term trend for manufacturers and producers of entertainment programs are also "Viacom" - the world wants their MTV; "Sigrem" new owner "of MCG-Yo" and "Liberty Media", the association of the cable network investments, " Telekommyunikeyshens Inc. "John Malone.


HIGHER, HIGHER AND MORE
Air transport is extremely sensitive to the growth of personal income people. New international middle class will take off in the friendly skies. They will fly on business and for pleasure. In the next five years, you can probably make a lot of money by investing in international airlines. But there will be less complicated and may also invest in profitable company, "Boeing". Along with the consortium "Yurops Airbus," it will build a fleet of foreign aircraft to provide increased air travel abroad.

We are near the lowest point on the five-year cyclical downturn in the aviation industry. Industry studies show that in the next 20 years will be built 12,000 new aircraft to meet increasing global demand, and 4,000 aircraft will be replaced by new ones because of their age, or inefficient use of fuel, or non-compliance with the new requirements of control over noise levels. That means 16,000 new aircraft, built over the next two decades. "Boeing" here - the leader in technology - will receive the lion's share of orders.

Another alternative - investing in the wholesalers supplying the "Boeing". In the atom is very small sector of clean players, but the companies that extract from the commercial aircraft industry a substantial amount of revenue include "Ametek", "Pres" Honeywell "and" Curtis Wright "." Sekou Bldg., "Whose office" Kromalloy "- the leader in Maintenance and repair of jet engines - will be a good map of the "aging of the existing fleet."


MERGERS
Another dynamic global action is not new, but far from complete, the process of strategic mergers and acquisitions. Round Table in 1995, I said that next year will be made mass transactions. Such transactions in the U.S. has 158 billion dollars, and in the world - 866 billion dollars I do not know, will we see the same volume of transactions this year, but the amount will still be large. Why? World flooded with liquidity, rising stock markets make the shares more valuable currency. And, more importantly, is still cheaper to buy companies on global stock markets, rather than create them from scratch.

How can I make money on the long-term trend? Here I will not hesitate to preach in favor of his own church. As we were taught to Benjamin Graham and his successor at the university, "Columbia" Roger Murray, and that so profitably applied in practice, Warren Buffett, the shares should be treated as if they were part of the company, which you hlite purchase at a price below that Graham called intrinsic value, others call it economic value and that years ago was called the "private market value."

How do we measure value? We believe the best barometer of the company's value - free money, defined as earnings before interest, taxes, depreciation and amortization (EBITD), or light varnatsiya, EBITDA, which in both cases, the deductible investments needed for growth. Most experts on mergers and acquisitions of corporations studied the same parameters. When the manufacturer knows the company estimates for the purchase, he or she does not attach much importance the declared value of the assets. This is for accountants, but not for sensible shoppers enterprises. They are probably not very concerned and on net profits. Smart corporate managers can be creative to take into account profits. This enlightened industrialist wants to know how much money it brings enterprise today and how many need to invest in a company to maintain or increase the flow of funds in the future.

There are other factors affecting the determination of the private market price. The cost of capital always affects the value of the company.