Gabelli Value Plus+ 28 August 2019
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.
With exposure across the market cap spectrum, and a disciplined proprietary value investment philosophy, the Gabelli Value Plus+ trust offers a differentiated investment solution and portfolio to a typical US equity vehicle. Using the proprietary Private Market Value with a Catalyst™ investment process that focuses on both the intrinsic value and strategic premium that a company offers a potential purchaser, the managers seek to identify companies which are trading on a substantial discount to the price which an informed buyer would pay for an entire business in a negotiated transaction. In addition to this, they seek to identify a catalyst(s) to realising this value, looking at a variety of factors or potential drivers of a rerating. These can be company specific or relate to the industry at large.
Historically, Gabelli’s forty plus years running this investment process has provided attractive downside protection characteristics whilst offering a relatively idiosyncratic returns profile. Whilst the trust itself has a relatively short track record, having only been launched in February 2015, Gabelli as a firm has been operating with the same investment philosophy since 1977, with annualised CAGR outperformance of c. 4% relative to the broad equity universe, using the S&P 500 as representative.
Since launch, the trust has generally demonstrated an ability to protect capital against market drawdowns. It has also shown a reasonable degree of correlation to value strategies, in line with the investment proposition.
The focus on bottom-up analysis often leads the team into stocks with low levels of broker coverage in the smaller cap areas of the market. Around 10% of the long-term portfolio has historically been invested in companies that eventually became the subject of takeover bids (consistent with the focus on evaluating the value of a company to its ‘Private Market Value’).
Whilst the portfolio is differentiated from the wider US market in any event, further differentiation is afforded with the option of investing a portion of the portfolio (currently around 10%) in merger-arbitrage opportunities, where companies are the subject of takeover bids and tend to trade just below the takeover offer value until consummation; returns from these opportunities are uncorrelated to wider market movements.
The trust focuses on total return rather than generating an income, so distributions are not guaranteed; income generation is likely to be a side-effect, rather than an aim of investment.
With investors continuing to favour highly liquid, large-cap secular growth opportunities, the trust has remained at a discount to NAV in its recent history; currently this is around 7%. The board has previously been active in buying back shares to try and manage this, and a tender offer is currently being considered. The tender offer will be for up to approximately 14.99% of shares outstanding, but, as this was only announced on 31.07.2019, full details are yet to be confirmed.