RYE, N.Y.--()--GAMCO Investors, Inc. (GBL: NYSE) announced that Standard & Poor’s has awarded its highest Platinum grade to the GAM Star GAMCO US Equity fund and to GAMCO’s underlying Private Market Value with a Catalyst ™ (PMV) stock selection strategy for the ninth year running.
“Our global analyst and portfolio investment team is very honored that our fundamental PMV research driven stock selection process has extended its S&P top rating streak to now include 2012.”
Mario Gabelli, Chairman of GAMCO Investors, Inc. said, "Our global analyst and portfolio investment team is very honored that our fundamental PMV research driven stock selection process has extended its S&P top rating streak to now include 2012.”
GAM Star GAMCO US Equity is one of only two funds among the 61 currently rated in S&P’s America Sector, as of October 31, 2012, to receive the Platinum grade. The fund was launched in July 2011 and its predecessor, GAM GAMCO Equity initiated in October 1987.
The S&P Platinum grade is a widely acknowledged measure of excellence, awarded only when, in S&P’s words:
The fund demonstrates the highest standards of quality in its sector based on its investment process and management’s consistency of performance as compared to funds with similar objectives.
In affirming the Platinum grade for the fund, S&P stated:
Gabelli's experience as an investor, together with a solid long-term track record which has been built by adhering to a disciplined process, supports the retention of the fund's S&P Capital IQ Platinum grading.
The following is excerpted from S&P’s Platinum grade report dated January 21, 2013:
Gabelli is a highly experienced investor who has acquired a wealth of knowledge during his 45-year investment career. He is supported by a well-resourced team of 34 equity analysts who are guided by his thematic and sector views when conducting their bottom-up driven research. This leads to biases to certain industries, such as media (+11.2% relative to benchmark) and capital goods (+10.7%), and is a reflection of the fact that portfolio construction is carried out with little regard to its benchmark. A diversified portfolio of 100-150 positions is therefore important to control risk.
In the last 18 months, there has been a particular emphasis on the financial engineering activities of companies, which has led to new investments in firms such as DE Master Blenders 1753 and Fortune Brands Home and Security. These were spun out of Sara Lee (now known as Hillshire Brands Company), and Fortune Brands (now known as Beam), respectively. Gabelli has also benefited from an increasing trend of companies looking to convert to Reit status with Ryman Hospitality Properties – formed following Gaylord Entertainment's decision to pursue this process - an example of this.
GAMCO's team of global equity research analysts is broadly split between seven sector categories: aerospace and capital goods; consumer; health; energy and utilities; media and telecoms; natural resources; and financial services. One of four senior analysts leads on at least one of these sector groups.
Analysts follow their sectors on a global basis and are responsible for the gathering, arraying and projection of company data for making investment decisions. Experience in the team varies considerably. The majority of the analysts are US-based, with the rest in London, Hong Kong, Tokyo and Shanghai.
On the Fund’s Management style, S&P wrote:
The bottom-up, value-driven investment process employed by Mario Gabelli is founded on the principles of Graham & Dodd, where the emphasis is on investing in undervalued stocks that have a high probability of achieving their intrinsic or private market value (PMV) over time through the intervention of a discernible catalyst.
The PMV is defined as the value that Gabelli believes an informed investor would be willing to pay to own the entire company. Catalysts could be a specific event (M&A and management changes) or be sector-related (regulatory changes and industry consolidation) with varying time horizons.
Research is focused around themes that reflect Gabelli's areas of interest and expertise. There will often be a bias to industries, such as media, where a wealth of industry data can be used to compare asset values. Fundamental analysis helps to highlight companies with a strong franchise, shareholder friendly management and the ability to generate sustainable free cash flow. Meeting company management is a key part of the process, and the team makes more than 1,000 on-site visits a year.
To determine whether valuations are attractive, analysts estimate the direction and growth rates of EBITDA, cash flow and earnings, as well as the company's PMV. The best opportunities tend to be found in the under-researched small-/mid-cap stocks. Positions are built gradually according to conviction, with the average holding period being three to five years. Turnover is very low, as the team is prepared to wait for catalysts to materialise.
Since the final portfolio of 100-150 positions is built from a purely bottom-up basis, there is little regard paid to the benchmark S&P 500 index. While deviations at the stock and sector level are unconstrained, individual positions are usually capped at 5%, with the top 10 holdings comprising 25-30% of the fund. Risk is largely controlled through the construction of a broadly diversified portfolio.
GAM Star GAMCO US Equity was awarded a Platinum grading (previously categorized as AAA) in November 2011. GAM GAMCO Equity was rated AAA by S&P from October 2004 to October 2011. GAM Star GAMCO US Equity – USD Class was seeded by the transfer of the holdings of GAM GAMCO Equity on 27 July 2011. GAM Star GAMCO US Equity – USD Class has inherited the performance and price history of GAM GAMCO Equity, which incepted on 20 October 1987. All references to price and performance for periods to 27 July 2011 refer to the performance of GAM GAMCO Equity. GAM GAMCO Equity is a company established in the British Virgin Islands structured to operate in a similar way to an open-ended unit trust and had the same investment objective and policy as GAM Star GAMCO US Equity. The fund has been sub-advised by GAMCO Asset Management Inc. (a subsidiary of GAMCO Investors, Inc) for GAM, continuously since October 1987.
Standard & Poor’s is a globally recognized provider of objective fund information as well as ratings on debt securities; a leading authority in the investment world. S&P’s fund evaluation process is based on an in-depth analysis of both the quantitative and qualitative factors considered to be key contributors to long-term investment performance. These include the historic performance, volatility and portfolio construction of a fund; the manager’s investment process, risk control, skill, experience and resources; and the group’s corporate management, investment culture and stability.
GAMCO Investors, Inc., through its subsidiaries, manages private advisory accounts (GAMCO Asset Management Inc.), mutual funds and closed-end funds (Gabelli Funds, LLC), and partnerships and offshore funds (Gabelli Securities, Inc.). As of December 31, 2012, GAMCO had $36.4 billion in assets under management.
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