Gabelli Value Plus+

Gabelli Value Plus offers exposure to value opportunities in US stocks trading at a discount to their value to an informed buyer...

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Gabelli Value Plus+. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Gabelli Value Plus+

Gabelli Value Plus+ (GVP) aims to achieve strong total returns through investment in a portfolio primarily of US equities. Managed by GAMCO, GVP utilises a disciplined proprietary investment philosophy known as Private Market Value with a Catalyst™.

As we discuss under portfolio, this investment process focuses on both the intrinsic value and strategic premium that a company offers to a potential informed buyer. The team of over 40 analysts look to evaluate and understand stocks from a bottom-up perspective, and identify such opportunities where they also believe there exists a catalyst to drive this value realisation.

A continuation vote will take place on 30/07/2020, and shareholder votes must be submitted before 28/07/2020.

If the shareholders vote in favour of continuation, it is proposed that the trust could adopt new policies regarding an enhanced dividend payout, as we discuss under the Dividend section. This would significantly enhance the levels of distributions were it to be adopted.

Similarly, proposals supporting continuation suggest a lower management fee be adopted (see Charges), and that buybacks be undertaken if the discount exceeds 10%. As we detail under Discount, the board in the previous financial year had in any event tended to support the share price with buybacks when the discount widened past this level.

Performance has been undoubtedly challenging, with both the small cap and value factors, which the trust’s process inherently lends itself to, facing severe headwinds over most of the period since the trust’s launch. As we note under the Performance section, changes in inflation expectations will likely continue to support or weigh on near-term returns.

Kepler View

If the concern of shareholders pushing for a wind-up is over performance, this is understandable looking backwards. However, looking backwards is probably not optimal for understanding prospects for returns. GVP has operated in an environment where stock leadership has been increasingly narrow, and increasingly amongst the largest companies. Some factors, such as the rise of passive investing, have helped contribute to this of course, as has the perception of a move to a ‘new normal’ in the wake of the Covid-19 pandemic and policy.

The question for shareholders is whether and to what extent these factors will persist indefinitely. As we have suggested here, it may be too soon to expect a durable recovery in small caps yet, and further patience may be required. And a higher discount rate (i.e. higher nominal interest rates) would, in our view, potentially help to catalyse and initiate a sustained value recovery. But just because an imminent reversal may not be in the offing (and the word ‘may’ is pertinent here), this does not necessarily mean there does not remain a long-term case for allocation to small-cap value. We would suggest that ultimately US economic dynamism may indeed depend on such a reversal to the favour of smaller companies, and will ultimately require higher interest rates. ‘Should’ is, of course, not the same as ‘will’. But the continued outperformance of large-caps to perpetuity is ultimately likely unsustainable within the current social contract.

bull bear
Should benefit if inflation materialises Near-term headwinds to smaller companies likely remain
More immediate value realisation potential if trust discontinued, likely favourable dividend policy if not If vote is in favour of continuation, several large shareholders will likely look to exit weighing upon the discount
Differentiated portfolio and returns profile to typical US equity vehicle Challenges to relative returns from market structure remain
Callum Stokeld
Callum joined Kepler as an investment trust analyst in July 2019. Prior to this he worked as a senior investment analyst on a range of multi-manager, multi-asset portfolios, having previously worked at IFA firms in roles focused on oversight of fund selection and asset allocation. He graduated from the University of Glasgow with an honours degree in Law.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

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The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

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