John Belton, Portfolio Manager and Managing Director for Growth Portfolios at Gabelli Funds, joined Keith Black, Managing Director of RIA Channel, to discuss how Gabelli’s growth team invests within a value franchise.
In 2024, the market was abuzz about artificial intelligence and sent many stocks sharply higher. Mario Gabelli is a pioneer of value investing and the portfolio managers in the firm remember the shared similarities between growth and value managers. As a firm, Gabelli performs deep fundamental analysis and has a commitment to investing in the best research.
In the technology sector, Gabelli’s growth team sticks to bottom-up fundamental analysis and considers the composition of each firm’s revenue, the profile of its margins, and its ability to generate a strong return on invested capital. Each company is valued on its earnings power and potential and the forecast of how those earning might grow in the future. Today’s beneficiaries of the AI boom are chip manufacturers and companies in the industrial sector that supply equipment to data center operators. Belton notes that some companies at the software layer have more inflated valuations based on the potential future benefits of AI.
The Republican sweep of the Presidency and Congress in November 2024 led to an immediate stock price reaction, with the market picking clear winners and losers. Belton states that it remains unclear how the new Republican administration is going to govern and what the impact will be on specific stocks and sectors. He is specifically interested in regulations on the largest technology firms and antitrust, two areas where the previous administration was very tough on businesses. The new administration may also have implications for global business, likely accelerating trends towards reshoring, which can unwind a portion of the cumulative globalization of the last few decades. Gabelli continues to overweight US stocks in its global funds, as the initial reaction of a strengthening dollar and a global preference for US stocks may continue into 2025.
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