Register Log-in Investor Type

News

Gabelli Value Plus expecting a return to form for value investing

Gabelli Merger Plus+ : GMP

Gabelli Value Plus expecting a return to form for value investing – The US equities focused investor, Gabelli Value Plus (GVP), has reported annual results to 31 March 2019. A total returns summary is shown below:

  • NAV total returns of +6.9% (-6.5% in 2018)
  • Compared to S&P 500 total returns of +18.2% (+2.0% in 2018) and Russell 300 value index +13.6% (-4.5% in 2018)
  • Share price +6.1% (-12.8% in 2018)

A breakdown of the trust’s asset allocation (%) at their year-end is shown below with the overweight exposure to industrials the biggest deviation from the indices.

wdt_ID Sector Portfolio of GVP  S&P 500  Russell 3000 Value
1 Communication Services 10.2  10.1  6.7 
2 Consumer Discretionary 16.1  10.1  5.6 
3 Consumer Staples 2.7  7.3  7.5 
4 Energy 0.9  5.4  9.4 
5 Financials 16.1  12.8  22.0 
6 Health Care 6.9  14.6  14.5 
7 Industrials 31.5  9.5  8.0 
8 Information Technology 6.6  21.2  9.9 
9 Materials 5.3  2.6  4.0 
10 Real Estate 0.8  3.1  5.9 

Manager’s review

“During the first quarter of 2019, the stock market had its best quarter in roughly a decade, with the S&P 500 Index up over 13% on a total return basis. This, of course, was after a very weak fourth quarter, when the market was down by about 13%. As has been the case for many years now, growth stocks have continued to outperform value stocks. In the first quarter of 2019, growth stocks, as measured by the S&P 500/ Citigroup Growth Index, were up 15% on a total return basis. Value stocks, on the other hand, were up by about 12% in the quarter, as measured by the S&P 500/ Citigroup Value Index. The good news is that, although value investing has been out of favor for many years now, we feel the market is poised to start favoring value stocks once again and we believe the portfolio is well positioned to benefit when that rotation occurs. During the last few years, large caps stocks have also outperformed small and mid-cap stocks in the U.S. Since “trees do not grow to the sky” and smaller cap quality stocks tend to have better growth prospects, we expect our bias towards small and mid-cap value stocks will start to pay off in the years ahead.

The U.S. economy is in its 117th month of expansion, just four months short of the record. Just as impressive, the bull market in U.S. equities recently celebrated its 10th anniversary. Although both of these statistics are reaching records in terms of longevity, it is important to note that the expansion and bull market have both been somewhat muted in terms of strength. We continue to believe the U.S. economy will expand, although at a somewhat slower pace. The economy grew in real terms at approximately a 3% pace in calendar year 2018 – in calendar year 2019, we expect the economy will grow by approximately 2%, still a healthy growth rate but down slightly year over year. Unemployment in the U.S. is near all-time lows, and wage inflation is slowly starting to pick up, which we think is a good thing. Against this backdrop, we believe bottom-up, fundamental stock selection of the type we have practiced for over forty years remains more important than ever.”

GVP’s approach

GVP describes itself as a an active, bottom up, value investor. It seeks to achieve real capital appreciation (relative to inflation) over the long term, regardless of market cycles. The trust deploys a Private Market Value (“PMV”) with a Catalyst™ methodology. PMV is the value that they believe an informed buyer would be willing to pay to acquire an entire company in a private transaction.

Their research process identifies differentiated franchise businesses, typically with strong organic cash flow characteristics, balance sheet opportunities, and operational flexibility. They seek to identify businesses whose securities trade in the public markets at a significant discount to our estimates of their PMV, or “Margin of Safety.” Having identified such securities, we look to identify one or more “catalysts” that will narrow or eliminate the discount associated with that “Margin of Safety.” Catalysts can come in include corporate restructurings (such as demergers and asset sales), operational improvements, regulatory or managerial changes, special situations (such as liquidations), and mergers and acquisitions.

GVP: Gabelli Value Plus expecting a return to form for value investing

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…