For Mario Gabelli, it’s important to know what’s happening in the world and understand what it might mean for the future.
“It’s how you connect the dots in the world on an ongoing basis to make a profit,” he told the JBN Business Breakfast networking event held Sept. 12 at the DoubleTree Hilton in Tarrytown.
JBN, the Jewish Business Network, is in Dobbs Ferry and is a nonprofit serving Jewish businesspeople in the Rivertowns area of Westchester. Its mission includes providing opportunities for developing business connections.
Gabelli was the keynote speaker at the breakfast meeting and laced his remarks with rhetorical questions investors need to answer for themselves before making investment decisions, such as:
• “What is the reason we’re arm-wrestling with the Chinese?”
• “How important is it to get stuff out of the landfill?”
• “Why did MGM buy Yonkers Raceway?”
He noted that people like pets and there are 94 million dogs and 88 million cats in the U.S.
“So, how do we profit from that?” Gabelli asked.
“Some of the things we’re looking at are plastic substitutes. Metal cans and recycling. What companies do that on a global basis? How important is recyclable aluminum?” Gabelli said.
Gabelli’s Rye-based GAMCO Investors Inc. conducts its investment advisory business principally through GAMCO Asset Management Inc., Gabelli Funds, LLC and G.distributors, LLC, according to a recent filing with the Securities and Exchange Commission. GAMCO, a public company trading on the New York Stock Exchange, provides investment advisory services to 24 open-end funds, 16 closed-end funds and approximately 1,700 institutional and private wealth management investors principally in the U.S. Gabelli founded the company in 1977. He grew up in the Bronx and went to Fordham University, graduating in 1965. He holds an MBA from Columbia Business School and honorary doctorates from Fordham and Roger Williams University. In 2010, Fordham renamed its undergraduate business school the Gabelli School of Business, expanding the name to cover its graduate business program in 2015.
Gabelli, whose net worth was estimated by Forbes as being $1.7 billion as of Sept. 13, said that financial inequality in the U.S. is a serious problem.
“More important, you’ve got to bring back the American expectation that if you want to work your fanny off, you can get ahead. I don’t know if that still exists,” he said.
He opposed a wealth tax, one paid annually based on a person’s assets.
“On the other hand, I don’t see why you don’t pay 50% tax on income over a certain level,” he said. “However, you’ve got to be a lot more efficient in how you spend the money. Everyone in this room that runs a business watches how they spend money. If the government started thinking the same way, that would be one solution.”
He said if the Federal Reserve keeps lowering interest rates and brings them down to zero, that should in theory help with national debt issues provided the government doesn’t spend the money it saves from not having to pay interest on the national debt.
Gabelli also identified student debt as a major issue. He displayed a chart showing that in the first quarter of 2009, student debt totaled $663 billion. In the first quarter of 2019, student debt was $1.49 trillion. He asked “How do we solve that problem?”
Gabelli said learning both what people are doing in society and what they’re doing to the planet play important roles in looking for profit-making opportunities in stocks.
He noted that current events also figure into the research process and mentioned the latest debate of Democratic presidential candidates and the campaign season.
“I like it because I own broadcast stocks and they (the candidates) advertise,” Gabelli said.
Gabelli has had the U.S. housing market in his sights.
“Lennar is a company based in Miami and does a terrific job in residential,” he said.
Regarding military suppliers, a chart he presented named the companies Harris, Textron and Kaman.
“I don’t have any Chinese military stocks to recommend today,” he joked. “Kaman, they’re up in Connecticut and they have a tapered roller bearing which is very attractive.”
In the entertainment field, Gabelli commented, “We own a company in L.A. called Live Nation. When you listen to Spotify, when you listen to Pandora, the talent is getting incremental revenues from streaming, but there are also people behind that that get royalties, and the royalties are rising dramatically and you can find companies like Sony and Vivendi that own 50% of the music business.”
Gabelli said he’s waiting for James Dolan to spin off the New York Knicks basketball team.
“The Knicks are fantastic,” he said. “They have the worst record. It is unlikely to be duplicated. And the stock … he announced a year ago that at some point he’ll spin off the Knicks and the Rangers (hockey team) and you’ll be able to buy them depending on how he structures the deal. Stay tuned.”
One sports team which can be bought now, Gabelli pointed out, is baseball’s Atlanta Braves. He also said if you can’t afford to buy a Ferrari automobile, maybe you can afford to buy part of the company at about $153 a share.
In the category of betting, in addition to MGM, Gabelli’s stock chart showed Eldorado Resorts Inc., a hotel and casino company based in Reno, Nevada, which reported 2018 revenues of $2.1 billion. Also listed was Churchill Downs Inc., which has spread out from just the racetrack in Louisville, Kentucky, to become involved in other racetracks, casinos and online betting.
Gabelli’s funds are investigating and invested in many more stocks than the few he mentioned during the event. When investors look at the world and the stock market, Gabelli says they need to develop analytical skills.
“Does this provide support for a stock? What are you going to do with your portfolio? What kind of returns are you going to get? How much volatility do you want?” he asked.
He said the impact of technology should not be overlooked.
“It’s the digital revolution that’s changing the social world,” he said. “E-commerce. Amazon. My wife won’t buy anything without price checking. She won’t even go to Costco without checking prices. And we’re loaded with toilet paper.”