During his recent interview with Columbia Business School, Mario Gabelli discussed his investing strategy of private market value with a catalyst. Here’s an excerpt from the interview:
Gabelli: Well, it’s not my philosophy. It’s just echoing others’ — but I did add something into the mix. In the mid ’70s, I started a firm, but nobody wanted to own stocks.
Businessweek even had a headline, “The Death of Equities.” I had to figure out a way to convince individuals to invest.
So I asked, if I found a company that was publicly traded, what would it be worth if somebody could buy the entire company? And I think in terms of private companies, so what is the private market value (PMV)?
And then, because my clients’ time horizon was two or three years — not two or three hours — I looked for what’s called a catalyst.
Catalysts can take many forms, like a new product introduction, an industry consolidation, or a sale or spin-off — something that might cause a previously undervalued company to reach its intrinsic value. I trademarked the concept of “private market value with a catalyst,” and that’s my fingerprint on value investing.
You can read the entire interview here:
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