When savvy, seasoned investment pros chase and snap up a stock or set of stocks for projected long-term rewards, you can bet that reams of research and careful judgment produced that deliberate decision. Hence, the market strategists’ advice to investors to pay close attention to how the money wizards invest is a valid proposition.
So when the likes of Mario Gabelli or Carl Icahn, to name just two dynamic examples, get fired up over specific stocks, investors should try to divine their logic, and enthusiasm. The Gabellis or Icahns didn’t amass their fortunes and envied status by making mindless moves.
The ace wealth manager Gabelli, who heads the highly successful investment firm GAMCO Investors (GBL) which includes the Gabelli Funds, is passionate and thorough in his quest for investment gems. One that’s high on his favored list is Liberty Media (LMCA/B), whose chairman is canny mogul John C. Malone.
GAMCO owns on behalf of its clients some $2 billion worth of the Malone-related companies, or about 5% of GAMCO’s $47 billion assets under management.
Icahn, on the other hand, has been very open about his bullishness on Apple (AAPL), and enthusiastically proclaims publicly that he buys more shares each time the stock dips. The chairman of Icahn Enterprises (IEP) continues to believe that Apple is one of the best investment choices he has made, mainly because of the huge growth he sees ahead for Apple despite the gigantic success the company has already achieved. Icahn argues that Apple is just in the early innings of its period of super performance.
And at the Gabelli camp, the fund with the largest exposure to Malone and his wide network of enterprises is the Gabelli Multimedia Trust (GGT), a $275 million closed-end fund with 18% of its assets invested in Malone-linked companies.
The combined world of media, communications, and entertainment is one of the more enduring and important areas where opportunities abound for long-term investors, according to astute investor Mario Gabelli. It’s one of the investment areas that should generate steady, significant rewards for investors, he argues. And John C. Malone’s group of companies cover that universe, says Gabelli, who thinks Malone is one of the most insightful, intrepid and successful global investors around.
“John Malone is one of the greatest capital allocators,” says Christopher Marangi, portfolio manager at GAMCO. Malone has formulated a blueprint on how to create value, he adds, and that’s why the companies he heads invariably excel. Among them: Liberty Broadband (LBRD), Liberty Interactive (QVCA/B), Liberty Global (LBTY), and Liberty Ventures (LVNT). These Malone-led companies have expanded their global reach by buying strategic equity stakes in a number of fast-rising enterprises.
Liberty Media, for one, owns a 57% stake in Sirius XM Holdings (SIRI), a provider of satellite radio services that offers digital-quality audio programming. It also owns a 28% interest in Live Nation Entertainment (LYV), which owns and operates booking rights for 158 venues in entertainment platforms in 33 countries. And Malone himself has a 4% stake in Liberty TripAdvisor and holds a 6% interest in Starz (STRZA/B), a media and entertainment company.
And Liberty Broadband owns 27% of Charter Communications (CHTR) and a 2% stake in Time Warner Cable (TWC). Liberty Interactive, which owns 100% of QVC, also has a 38% stake in HSN, which owns the shopping network HSN.com.
“Dr. Malone’s formula for success has included a focus on gaining scope and scale in industries with competitive moats, leveraged equity returns, tax-efficient deal making, and a knack for identifying and retaining superb management teams,” says Marangi. Indeed, investing in Malone’s network of Liberty companies has been amply rewarding for big investors like Gabelli. Marangi points out that the companies emanating from Liberty have collectively returned 15% since the first spin-off (Liberty Global) in June 2004, outscoring the S&P 500’s gain of 5.6% in the same period of time.
Past performance is never a guarantee of future results, of course, but Malone and his team, says Marangi, have “demonstrated an ability to create and surface value which should lead to above-average returns over the next 10 years.”
Mario Gabelli’s distinct bullishness about John Malone and his team that oversees a string of successfully operated companies in media, entertainment and the digital world has indeed generated great value and handsome returns over the years for the Gabelli funds.
But other investors oriented towards long-term goals but aren't anywhere near the size of Gabelli's investment resources could simply choose and pick one or two of Malone’s publicly traded companies – and will probably do very well.
