Long-time market observer and chief investment officer of Gamco Investors, Mario Gabelli, was recently interviewed on Bloomberg Television’s “In the Loop” and shared his views on the economy and stocks with Betty Liu and Dominic Chu.
Gabelli said investors should try to find companies that have good balance sheets and growing dividends that can capitalize on the global marketplace. Gabelli said we have a lot of those kinds of companies.
Gabelli mentioned Colgate, General Mills, Genuine Parts, and Emerson Electric. He said investors are interested in capturing the returns that are imbedded in equities over a long period of time, which is the dividend. He pointed out that over time 45% of the return from equities has come from the dividend. Gabelli added that when you get 0.5% from a five year or two year bond, or a Treasury, you want growth.
Gabelli said if you have two outliers on a bell-shaped curve, which are inflation and deflation, and you increase the probability of both, what you want to own are great companies with growing cash flow.
When asked which market sectors he liked, Gabelli said he looked at the predictability of earnings power and mentioned Nestle’, General Mills again which has products in health and wellness, industrial companies which can capture the global demand, companies that sell replacement parts, and U. S. centric utilities with 4-5% growth and 4-5% current returns. Gabelli added that as long as dividends aren’t taxed at an onerous rate, for instance moving from the 15% rate to 25-30%, that could change a bit.
The interview continued with Gabelli discussing “bottoms up” investing; his view on the investing in the U. S. versus going globally; his expectations for the economy, housing and earnings in 2012; the possibility of an increase in corporate spin-offs creating value; the possible risks to the global economy; some additional stocks and sectors he likes; and his view on gold and diversification.