Gabelli’s Global Investing Game Plan: Go Big on US Stocks

One of the more well-known players in global investing is Mario Gabelli’s firm, which manages institutional and retail money, even though its $31 billion in assets under management are far down on the list from the likes of Vanguard, No. 1 with $7.2 trillion In a recent webinar, a trio of strategists at GAMCO Investors Inc. (formerly Gabelli Asset Management Co.) sketched out their preference for U.S. stocks.

In general, overseas stocks have long been an investment management imperative, under the theory that other nations, particularly emerging markets, show greater promise than domestic equities do. A “global” strategy, as the name suggests, encompasses both foreign and U.S. markets.

These days, though, the U.S. is the best bet, according to the three strategists: Howard Ward, Gabelli’s CIO of growth equities, John Belton, portfolio manager for a variety of the firm’s growth strategies, and Caesar Bryan, co-portfolio manager of the Gabelli Global Growth AAA fund. Belton and Ward are the two other co-managers of the portfolio. Indeed, the fund has 68% of its investments in U.S companies, per Morningstar.

Gabelli Global Growth’s track record has earned it investor attention. This 30-year-old fund, one of Gabelli’s largest with $186 million in assets, has long beaten its benchmark, the MSCI All World Index—this year, according to Morningstar, the fund is up 25.7%, outpacing the world index by almost 12 percentage points. One big reason is that the fund has that heavy allocation to U.S. stocks, at a time the index has just 63% (which is up significantly from the level 20 years ago, 40%).

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U.S. equities have been way ahead of the rest of the world for many years. The S&P 500 has increased 14.7% in 2024, leading the other major indexes (except for the Nikkei 225’s 17.1%, in a comeback after years of blah performance for Japanese stocks).

“The U.S. has the best secular growth prospects among the developed world, as we lead in both demographics and productivity,” said Belton. The nation has the strongest capital markets, mightiest military, best infrastructure and largest consumer market, he pointed out. America, he added. has “trounced the rest of the world’s markets over the past five, 10, 15 and 20 years.

Mario Gabelli, the founder, CEO and chairman of GAMCO, is a perennial value investor, who disdains hot-stock devotees chasing after popular growth shares. But the three growth “portfolio managers operate independently from Gabelli,” said Doug Jamieson, president and COO at Gabelli Funds, in a statement.

The Gabelli Global Growth fund has maintained its exposure to U.S. tech stocks for many years, having bought them when they were cheaper. It has not only added tech stocks, of course; Chipotle is a large position. As a Morningstar analysis of the fund wrote, the stocks it buys “are likely to have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued.”

This blueprint has worked well, as tech stocks have been on a roll this decade: Apple has been a fund holding for 11 years, Alphabet for 12, Amazon for 16 and Microsoft for 15. All have leapt up in value.

Of the fund’s top-10 holdings, which make up almost half its asset value, only two are from abroad, both French: luxury goods maker LVMH Moët Hennessy Louis Vuitton and beauty products company L’Oreal.

The strategy is to look at portfolio stocks in terms of fundamentals, with little attention to a stock’s national origin, Bryan said. “Think of equities as a single asset class and build a portfolio of best ideas and companies without the somewhat artificial constraint of geography,” he declared. Right now, to be sure, that approach has resulted in a major emphasis on U.S. names.

Unlike many managers who invest overseas, the Gabelli folks do not do currency hedges. Ward explained that their expertise is not foreign-exchange forecasting: “We generally avoid investing in the kinds of countries or currencies that are going to have massive percentage changes.”

Emerging markets, which earlier this decade were a hot area, are not high on the three strategists’ list. China’s massive growth was the largest driver for EM companies, which sold commodities to the Asian giant—yet now China’s growth has slowed, Ward observed. In addition, he said, commodity-based economies are just too risky, especially in light of climate change. For one thing, he went on, “the extreme heats are destroying crops” and “rising waters” also threaten them

Given China’s threats to invade Taiwan, the Gabelli managers also are not eager to invest there. Ward said, “Should China choose to [conquer] Taiwan, I don’t think that would be very helpful for investors in China.” Added Belton, “We view the risk in Taiwan Semiconductor as is too much right now.”

The Gabelli managers also are down on one U.S. stock, that of Tesla Inc. The Gabelli funds sold their entire stake in the electric vehicle maker in 2024’s first quarter—65,900 shares. Belton said the decision was not due to the controversial behavior of its founder, Elon Musk. In Belton’s view, “The moral of the story is the fundamentals just deteriorated,” with demand and deliveries slowing for Tesla’s autos and now the company is cutting prices, “which is eating into their profit margins.”