Fund Profile: The Gabelli Asset Fund AAA Class

by Ann C. Logue

Mario Gabelli is one of Wall Street's legendary money managers, with a long track record of finding profits for investors. The Gabelli Asset Fund is the flagship among several open-end and closed-end funds, founded during a big bull market and lasting through quite a few down cycles. He's made his mark through careful research, excellent stock selection, and strong discipline when the markets move against his mid-cap growth style. The fund is down for the year so far, creating what may be a great buying opportunity.

Gabelli has credentials and a philosophy behind his performance. He holds the chartered financial analyst designation and is a committed fundamental investor. He's particularly fond of the analytical style of Benjamin Graham and David Dodd, professors at Columbia University who published their seminal guide to stock selection, Securities Analysis, in 1934. (Warren Buffett is another of Graham and Dodd's acolytes.) Their method favors companies that generate big cash flow because of a strong business franchise. Because Graham and Dodd had a value bias, those who hold too fast to their principles will rarely find anything worth buying in the modern stock market, even in the current slump. That's why Gabelli has taken the Graham and Dodd style a step further and added a requirement that there be a catalyst, something that's driving the company to have greater sustainable value that might otherwise be expected. That allows him to find value far beyond the private market margin of safety that Graham and Dodd told investors to seek.

The Gabelli Asset Fund's largest holding, at 2.7% of assets, is News Corp. (NYSE: NWS), the media empire operated by Rupert Murdoch and that includes both Fox and Dow Jones. Next is Deere & Co. (NYSE: DE), at 2.4% of assets, which makes agricultural equipment and has been a beneficiary of increases in acreage, both to meet demand for biofuels and to accommodate a growing world population. The fund's third holding, 2.2% of funds under management, is Telephone and Data Systems (AMEX: TDS-S), which operates regional cell phone and telephone companies under the U.S. Cellular and TDS Telecom names. Although the fund's top holdings are heavily weighted toward communications companies (Rogers Communications (NYSE: RCI), Cablevision Systems (NYSE: CVC) and Liberty Media Interactive (Nasdaq: LINTA) show up further down the list of top 10 holdings), its largest sector weighting is food and beverages at 12.3% of total assets. In total, the Gabelli Asset Fund allocates its $3 billion in assets among 494 different stocks.

Gabelli is neutral on the divide between brokers and direct selling, which makes the fund popular with those who make their own decisions and those who use financial advisors. The catch? Along with the usual confusion about different classes of shares in broker-sold funds, Gabelli has an extra AAA class to accompany the usual A class, and it no longer offers the B class with a contingent deferred sales charge. Instead, it has a C class with a high 12b-1 fee and small broker commissions. The AAA class is sold through Gabelli directly at no load but with a 0.25% 12b-1 fee. The minimum investment is $1,000. The A class is sold through brokers at a 5.75% initial load and the 0.25% 12b-1 fee; the first breakpoint is at $50,000. The C shares are also sold through brokers with no upfront load, a 1% back load on funds withdrawn within a year of purchase, and a 1% 12b-1 fee. The management fee on all classes is 1%, and the expense ratio for the AAA class is 1.36%.

As with most equity funds, the Gabelli Asset Fund is down for this year, but its historic performance is great. For the last five years, it posted an average annual return of 15.52%, compared with the S&P 500's average return of 11.63%. From its 1986 inception, the fund is up an average of 14.16% per year while the broader market is up an average of 11.50%. That's the type of performance that earns four stars and accolades for Mario Gabelli.

Although it's tough getting excited about an equity investment in the current stock market, Gabelli and company have a fabulous track record. This may very well be the entry point that long-term investors look for when buying a fund.

This concludes this week's issue of MutualsAdvisor.com Weekly. We encourage you to visit our website to review past issues of MutualsAdvisor.com Weekly: http://www.mutualsadvisor.com/newsletter.cfm

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