One on One with Mario Gabelli, Chairman of GAMCO Investors.
Tuesday, October 14, 2008
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SUSIE GHARIB: Our market guest tonight says he's not a roaring bull or a growling bear, but he is buying stocks. Joining us now, Mario Gabelli, chairman of GAMCO Investors. Hi, Mario, nice to see you.
MARIO GABELLI, CHMN. & CEO, GAMCO INVESTORS: Great to be here, Susie.
GHARIB: Mario, what do you need to see happen for you to become decisively positive about the stock market and economy?
GABELLI: Well, we don't need to be decisively positive about the stock market or economy to make money. Susie, when I started in business in 1977, I had already been an analyst for 10 years. The market went down for five years, from 1977 to the summer of '82. And yet we were able to find very attractive bargains for our clients and had exceptional returns. So what I like to do is obviously look for what we as value investors look for, companies that are selling below intrinsic value where Mr. Market (ph), that is, the psychology, hammers them. And we're finding a lot of those bargains.
GHARIB: Tell us what you're finding. It seems like stocks have been decimated recently.
GABELLI: Yes, but, Susie, what has happened is that the market anticipated a very sharp decline. There was panic last week. There was a massive de-leveraging. People were dumping stocks, whether hedge funds, mutual fund investors, and so on. And when they announced this package on Monday and Tuesday, on a globally-coordinated basis, you basically said, hey, we are going to have solvency in the banks, it's going to be bad, but it's not going to be an absolute debacle. It may be the recession of '57-'58, or '71-'73 -- '73-'75, where GDP drops 3 percent. We are seeing that. I have been in the camp that argued the consumer has already had an awful effect. What we're looking for are global companies that sell products around the world that have cash-generating pricing power, companies like something as sweet as chocolate, Cadbury-Schweppes (CBY), where also there is the potential that the company would be sold at some point when financing is in place to strategic buyers. And companies as simple as Florida Power & Light (FPL), where Paul is sitting. The company that provides a utility, it dropped from $75 down to $35, was paying over 5 percent dividend, it's growing at 7-8 percent. It has nuclear. It has alternative energy, renewable energy in the form of wind power. Susie, there are a lot of companies like that out there. And there are more every day.
GHARIB: I bet there are. Mario, as a value investor, would you be buying shares of any bank stocks, especially the ones where the government is now going to have an equity position?
GABELLI: Well, Susie, today you noticed that when they come in and offer this kind of a position in the banking system, they're anointing their favorites. But all banks will be chosen, but many -- and some will succeed. Yes, the answer is that there are banks like Wells Fargo (WFC), M&T (MTB), JPMorgan (JPM) that would make sense in a portfolio. We tend to like companies that will be taken over as opposed to those that will just grow. But at the moment, they're so depressed relative to where they have been, and the opportunities are so good, they're speed bumps. I mean, the faster you -- Trichet (ph) did not answer the question on credit default swaps, FASB 157, you know, those things have to be addressed, they will be. And there are more speed bumps. But the news is not going to be pleasant in the economy, but the stock market has, in many ways, absorbed that. And there will still be some, you know, unpleasant surprises, but you have to be there to nibble at them. Looking out three weeks, I don't know. But looking out three years, this market will look like a bargain.
GHARIB: Mario, you were talking earlier about market psychology, investor psychology. Are you finding the investors in your Gabelli mutual funds are still redeeming, calling in for redemptions, or are they putting new money in?
GABELLI: Well, they're doing both. It depends on which fund. For example, we have one fund that -- without giving examples, I would prefer not, but we saw some redemptions earlier last week. And today we had no redemptions. So they come and go.
GHARIB: All right. Mario, the stocks that you mentioned, do you own any of them personally?
GABELLI: You know, I don't think so, Susie. But we own Florida Power & Light for selected clients. We own the companies that we mentioned, and most of our clients, whether 1,700 separated managed accounts or in our mutual funds.
GHARIB: Hard to keep them all straight. But thanks a lot, Mario, for coming on the program. We always enjoy having you here.
GABELLI: Susie, my privilege. And always fun to talk about stocks and how to make money for clients in an awful environment.
GHARIB: Absolutely. My guest tonight, Mario Gabelli, chairman of GAMCO Investors.
