Mario Gabelli: A Knack for Making Money

A street-smart guy with a flair for business

Mario Gabelli. (Photo: Michael O’Brien)

Mario Gabelli. (Photo: Michael O’Brien)

Even as a boy, Mario Gabelli had a knack for making money. He started work at the age of five or six, heading out with a shoeshine box to a station near his home in the Bronx. Passengers would get off the train and give him 10 or 15 cents to polish their shoes. Later, when he was in third or fourth grade, he also started selling cigarettes during bingo games in a church. He recalls: “I’d buy them by the carton and sell them by the pack.”

Mr. Gabelli, whose father made a modest living as a cook in a hotel restaurant, also worked as a caddy at fancy golf clubs. While waiting in the caddyshack for clients, “you could play cards and make extra money,” he says. “I was 11 or 12 and everybody thought they could win.” Some of the golfers worked on Wall Street, and he enjoyed listening to them chat about stocks. He set up a brokerage account in his teens and invested in companies such as Pepsi-Cola and Beech Aircraft. “I liked the action,” he says. “This was just another way to make money.” Investing appealed to his “old-fashioned gambling instinct” and played to his talent for “taking risk.”

Gabelli revels in this image of himself as a savvy, street-smart guy with a precocious flair for business. But he was also an exceptional student.

Mr. Gabelli revels in this image of himself as a savvy, street-smart guy with a precocious flair for business. But he was also an exceptional student. On graduating from his Catholic grammar school, he received three scholarships to study at Fordham University, where he majored in accounting and came top of his class. While insisting that he’s not hyper-competitive, he admits: “I still remember the two guys who gave me Bs 50 years later.” Why does this irritate him? “’Cause I was better than that.”

At Columbia Business School, Mr. Gabelli was taught by Roger Murray, who helped to update the investment bible, Security Analysis. Mr. Gabelli then worked as an equity analyst, initially covering autos, conglomerates, and farm equipment. Always quick to crack a joke, he remarks: “Well, if you grew up in the Bronx, they clearly assumed you were a farmer.”

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In 1976, Mr. Gabelli set up his own institutional research firm at a time when “nobody was starting up a business.” Stocks had been killed and bargains were plentiful, but he couldn’t pay his bills solely by selling research. So he started managing money, too. It didn’t take long to prove his talent for finding undervalued companies that were ripe for being taken over. Gabelli developed an innovative analytical approach, which involved calculating what a business would be worth if it went private. His estimate of a company’s “private market value” included its intrinsic value and the takeover premium that would be paid by an acquirer.

Gabelli Asset Management Company Investors has grown dramatically since those modest beginnings. It went public in 1999 and now employs about 20 portfolio managers and 40 analysts. It currently manages $47.5 billion in assets. What hasn’t changed is the firm’s intense focus on proprietary research. “We’re information hounds,” says Mr. Gabelli. At 72, he still thrives on the constant challenge of analyzing how events around the world will affect different businesses. “I have to be prepared for the unexpected and always afraid of missing something, paranoid about what I don’t hear…. The risk of failure is an important driver.”

Cover_HI (1)Is it a hard way to live? “No. Stop, stop! It’s fantastic! That’s why you get up at four or five in the morning,” he says. “You want to know what’s going on. You want to import this knowledge to the benefit of the clients and the teammates and then to the firm…. That’s what makes me tick.”

When I ask what he does outside of work, Mr. Gabelli mentions playing golf, “watching a lot of movies,” and shooting quail. But he seems just as happy to spend his evenings and weekends reading annual reports and trade journals such as Advertising Age and Automotive News. “You can connect a lot of dots in life that way,” he says. What about books? “I probably have read three or four books over the last five years. I can’t remember what they are.” How about novels? He snorts in mock disgust. “What’s a novel?” He’s never had much interest in the meaning of life, either. “I couldn’t give a crap about philosophy,” he says. “Bill Miller is clearly much smarter than I am… I’m just practical. A survivor.”

Mr. Gabelli’s survival skills have certainly served him well. Forbes estimates his net worth at $1.7 billion and says he has received more than $750 million in compensation from his investment firm since it went public. I ask if it annoys him when people suggest that he’s grotesquely overpaid. He replies: “If you compare me with my colleagues in the hedge fund world, they laugh at how little I make.” He adds that he also gives a lot back to society through donations to various schools. And is he proud to see his name on lists of America’s richest people? “No,” he says. “It’s an assassin’s hit list.”

Excerpted from The Great Minds of Investing, a new book featuring profiles by William Green and photographs by Michael O’Brien. Available on Amazon.com.

Mario Gabelli: A Knack for Making Money