How can you tell if a company is one in which you should invest?
It takes a lot of research, questions and eyes-on contact, Elizabeth Lilly, a chartered financial analyst with GAMCO Asset Management, told a group gathered for a two-day Value Investing Executive Education Program at Fordham University‘s Gabelli School of Business last week.
“We have a very intense research-driven culture,” Lilly said of GAMCO, the financial company founded by Mario Gabelli, whose monetary gifts to Fordham University led to the business school being named after him. “We do all our own research, bottom up.”
“If there’s one thing that differentiates us as a firm from a lot of others, it’s our research process. It’s very intense, it’s very focused and very consistent across all industries,” Lilly said.
Using public information about companies, GAMCO researchers gather, project and interpret data, creating a proprietary spreadsheet that not only looks back on a company’s performance but also looks forward.
Proxy statements about firms, Lilly said, are essential sources of information, as are annual reports and the chairman’s letter. But site visits also help determine whether a strong management team is in place. It is important to ask distinctive questions that can elicit the types of responses that will help determine whether the firm is a desirable partner.
Finding out whether or not the company is interested in growing the business and is focused on long-term value is important, Lilly said.
If a question is not answered, Lilly said, she might ask it seven different ways. Detailed notes are taken during all site visits, she said.
Attendees also heard from a number of other presenters, including Joseph Calandro, a managing director for PriceWaterhouseCoopers, the author of Applied Value Investing and a fellow at the Gabelli Center for Global Security Analysis. Calandro took his audience through a look at how value asset deals are made and gave examples of how leaders in the industry think.
The two-day program was held at Lincoln Center on March 16 and 17.