One of the best-known players in the international investment space is Mario Gabelli’s firm, which manages the money of institutions and individuals. Its $31 billion in assets under management is well below the likes of Vanguard, which ranks first with $7.2 trillion. In a recent webinar, three strategists from GAMCO Investors (formerly Gabelli Asset Management) outlined their preferences for U.S. stocks.
International stocks have long been a staple of investment management, based on the theory that other countries, especially emerging markets, offer better prospects than domestic stocks in general. “Global” strategies, as the name suggests, encompass both international and U.S. markets.
But the U.S. is the best bet these days, say three strategists at Gabelli: Howard Ward, chief investment officer for growth stocks at the firm; John Belton, portfolio manager for various growth strategies at the firm; and Cesar Bryan, co-portfolio manager of the Gabelli Global Growth AAA fund. Belton and Ward are the portfolio’s other two co-managers. In fact, the fund has 76% of its investments in U.S. companies, according to Morningstar.
Gabelli Global Growth’s track record has caught investors’ attention. The largest of Gabelli’s funds, with $186 million in assets, has been around for 40 years and has long outperformed its benchmark, the MSCI All-World Index. According to Morningstar, the fund is up 25.7% this year, beating the global index by nearly 12 percentage points. One big reason is that the fund is heavily allocated to U.S. stocks, at 68%, compared with just 63% for the index (up from 40% two decades ago).
Don’t miss a story – subscribe to the CIO newsletter to stay up to date on the latest news in the institutional investment industry.
U.S. stocks have led the rest of the world by a wide margin for many years, with the S&P 500 up 14.7% in 2024, leading all other major indexes (except for the Nikkei 225, which is up 17.1%, as Japanese stocks rebounded from years of weakness).
“The United States leads the developed world in both demographics and productivity, and our long-term growth prospects are the best of any developed country,” Belton said. He noted that the U.S. has the strongest capital markets, the strongest military, the best infrastructure and the largest consumer market. He added that the U.S. has “outperformed the rest of the world over the last five, 10, 15, 20 years.”
GAMCO founder, CEO and chairman Mario Gabelli is a longtime value investor who despises followers of popular stocks who chase popular growth stocks. But the three growth “portfolio managers operate independently of Mr. Gabelli,” Doug Jamieson, president and COO of Gabelli Funds, said in a statement.
The Gabelli Global Growth Fund has maintained exposure to U.S. tech stocks for many years, having bought them when they were cheap. Of course, it hasn’t just added tech stocks; Salesforce and Chipotle are big positions. The stocks it buys “have fast sales and earnings growth, above-average capital appreciation potential or are undervalued,” according to the fund’s Morningstar analysis.
This blueprint has worked, and tech stocks have performed well over the past decade: Apple has been a fund holding for 11 years, Alphabet for 12, Amazon for 16 and Microsoft for 15. All have skyrocketed in value.
Of the top 10 stocks, which account for almost half the fund’s assets by value, only two are foreign and both are French companies: luxury goods maker LVMH Moët Hennessy Louis Vuitton SA and cosmetics maker L’Oreal.
Bryan says the strategy looks at portfolio stocks from a fundamental perspective and doesn’t pay much attention to the country of origin of the stocks. “We look at equities as a single asset class and build a portfolio with the best ideas and companies, regardless of geography,” he says. Indeed, for now, this approach has resulted in a strong emphasis on U.S. stocks.
Unlike many managers who invest abroad, Gabelli’s team doesn’t hedge currencies; Ward explained that their expertise isn’t in foreign exchange forecasting: “We generally avoid investing in countries or currencies where we expect large percentage fluctuations.”
Emerging markets, while popular a decade or so ago, aren’t high on the three strategists’ list. China’s rapid growth was the biggest driver for startups selling commodities to the Asian giant, but now China’s growth is slowing, Ward noted. Moreover, he said, commodity-based economies are too risky, especially considering climate change. For starters, “extreme heat is destroying crops” and “rising water levels” also threaten crops.
Given the threat of a Chinese invasion of Taiwan, Gabelli’s management is also not keen on investing in Taiwan. Ward said, “If China chooses to invade Taiwan, [conquer] “As for Taiwan, I don’t think it’s very rewarding for Chinese investors,” he said. “We see too much risk in Taiwan Semiconductor at this point,” Belton added.
The manager of the Gabelli Fund is also down on a US stock: Tesla. The Gabelli Fund sold all 65,900 shares of the electric car maker in the first quarter of 2024. Belton said the decision was not due to the controversial actions of the company’s founder, Elon Musk. In Belton’s view, “the moral of the story is that the fundamentals have deteriorated.” Demand and deliveries of Tesla’s cars have slowed, and now the company is cutting prices, “eating into profit margins,” he said.
Related article:
Rogers, Gabelli, and Miller recommend value investing, but with exceptions
Building the electricity grid: investments in generation and transmission
Can Big Oil’s push into renewable energy be trusted, and is it good for investors?
Tags: Cesar Bryan , China , emerging markets , Gabelli , Gabelli Global Growth Fund , GAMCO , Howard Ward , John Belton , L’Oreal , LVMH , MSCI All World Index , Taiwan , Tesla , US stocks
