"Market Monitor"-Mario Gabelli, Chairman of Gamco Investors
Friday, February 09, 2007SUSIE GHARIB: 2006 was an important year for our market monitor guest, Mario Gabelli, chairman of Gamco Investors. Most of his mutual funds and individual portfolios delivered returns of 20 percent or better. Gabelli also settled a legal dispute with his original financial backers and a lawsuit with the Federal Communications Commission that charged Gabelli with manipulating government auctions for cell phone licenses. When I talked with Gabelli this afternoon, I asked him what he learned from these experiences.
MARIO GABELLI, CHAIRMAN & PORTFOLIO MANAGER, GAMCO INVESTORS: Well, you know, we're active business people and I don't remember the chapter that gave the paraphrase that being active in business, you're going to be sued and we're going to sue and we continue to fight for our shareholders' rights and stay focused on the basic business. As long as we make money for our clients, that's our main mission.
GHARIB: Mario, let's move on to your outlook for the stock market. You're forecasting 5 to 10 percent gains in stocks. What's your thinking here?
GABELLI: The economies around the world will do well, profits well, inflation in check. The markets will track earnings. We think earnings in part because of exports, in part because of the translation into dollars will be up 5 to 10 percent. So that's the goal that we're looking for.
GHARIB: You are also looking for a correction some time this year.
GABELLI: Well, we haven't had one and we know in part because we've been around a long time, that something always goes wrong -- and I can give you a laundry list of 10 or 15 items and whatever will go wrong, is not on that list. But a correction of 10, 15 percent has to be ruled in the cards and not out of the cards.
GHARIB: You have at the top of your stock recommendation list Hilton Hotels. What's the attraction?
GABELLI: There's a lot of takeovers and consolidation in the lodging industry. Hilton itself put together the Hilton outside of the United States have one common brand. (INAUDIBLE) the CEO is retiring. It is going to do a very good job. Fundamentals are terrific. There's an outside chance the company could be sold.
GHARIB: Is this a "buy" and "hold" or is it just a consolidation play?
GABELLI: No, no, it's - at $37, we think you can do quite well over the next several years by holding it and the company itself may be sold, but even if it's not, it will earn a good return.
GHARIB: Tell us about your interest in Gaylord Entertainment.
GABELLI: Well, Gaylord is an interesting company, located in Nashville. Some of us remember it as the old Opreyland (ph). The stock Gaylord has about 40 million shares. The stock is trading at 55.6 and we think they have a very good business model, catering to conventions, good occupancy, good growth and lots of communities that want them in their backyard.
GHARIB: (INAUDIBLE) TBL.
GABELLI: The small, over-the-air broadcasters were perceived to be dinosaurs in a Google-type world. When we look at it, they put the capital expenditures into going digital -- that's behind them. Secondly, they're starting to get revenues from the cable networks and from the satellite companies and from the telephone companies so that they're getting paid for their local programming. So economics are good and then in '08 you have an election and you have an election that will result in a tsunami of spending on political and the small broadcasters benefit. (INAUDIBLE) should earn about $0.80 in '08 and the owners of that company are in part (INAUDIBLE). Our clients own a substantial piece. We think the stock will double from here.
GHARIB: Dannon, the yogurt company, why do you like that stock?
GABELLI: That's kind of a fun stock, Susie. Yogurt is part of wellness. Everyone is thinking about eating better, eating healthier. Yogurt in the United States is just starting to take off. It's well understood, well consumed around the world and they have a water play between Evian (INAUDIBLE) in China and Volvick (ph). They are a prime beneficiary of the fastest growing segments of the food categories.
GHARIB: Speaking of beverages, you have Brown Foreman on your list.
GABELLI: That one is for those of us that like to have bourbon. And bourbon plays well in terms of the 1.3 billion consumers in China, what can we produce here to export there. And Jack Daniel's is very attractive. Brown Foreman owns it. They own some other wonderful brands like Findlandia and we like that.
GHARIB: The last stock on your list, Tyco International.
GABELLI: Tyco is splitting into three parts. The stock is currently $32, so Tyco will be a new Tyco and that is going to be an intriguing business, absolutely phenomenal. Secondly, it's going to own health care products and third they'll spin off their electronic businesses. So Tyco split up is worth more than what it's selling for today.
GHARIB: Mario, as for a disclosure, do you or your firm personally own any of these stocks that you're recommending?
GABELLI: We own them all, except for Hilton. And Hilton our clients have about 5.5 million shares.
GHARIB: All right, thank you so much, Mario. Pleasure to see you.
GABELLI: Great to talk about our favorite subject, stocks.
