Expert investors visit to talk real value investments

by John Rotonti, Gabelli Center Fellow

Students in the value-investing specialization, directed by Professor James R. Kelly, benefited this semester from guest lectures given by analysts and portfolio managers from GAMCO, the firm owned by Mario Gabelli (GSB ’65), as well as by other value-investing practitioners.

The first of three GAMCO visitors was consumer staples analyst Sarah Donnelly (GSB ’99). She introduced GAMCO’s mantra: “gather, array, project and interpret.” Then she outlined the firm’s investment philosophy, which is research-driven, focuses on absolute return, and uses Mario Gabelli’s proprietary valuation approach, called “private market value with a catalyst.”

The “private market value” part of that equation is the price an informed investor would pay for the entire company, Ms. Donnelly said, while “catalysts” might include takeovers, regulatory changes, spinoffs, and changes in cash-flow allocation. She then presented a case study on the company Mondelez, taking the class on a journey from Kraft’s acquisition of Cadbury in February 2010 to the split of Kraft and Mondelez in October 2012.

Meanwhile, in the Advanced Topics in Value Investing course, GAMCO portfolio managers Kevin Dreyer and Chris Marangi addressed the fundamental principles of the strategy: buying with a margin of safety, staying within your circle of competence, and buying only companies that have a sustainable competitive advantage. They, too, delved into Mr. Gabelli’s proprietary approach, using Sara Lee and Cablevision as examples to illustrate the hidden value of divisions within a company.

Coming to the value-investing program from outside the GAMCO family was Silver Point Capital partner Michael Gatto, a star investor with a knack for teaching. He spoke about distressed-debt investing — a new topic for the class, which normally focuses on equities — and detailed the steps a distressed-debt investor should take before making an investment. His last step represents wise investing guidance for all individuals, whether they work in the field or not: Before making any move, ask, “Is this the best investment for our capital at this time?”

Mr. Gatto will join the Fordham faculty in September as an adjunct instructor, teaching Fixed Income and Special Investments.

Finally, Joe Calandro, a managing director at PwC and a prolific author — including of Applied Value Investing, one of two textbooks used in the introductory class — came to talk about the characteristics of great value investors. He said they tend to be contrarian, engage in a deep level of analysis, recognize that investing is an art rather than a science, work very hard and read everything.

Those are things that any Gabelli School student could accomplish.

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