Help Me, Mario?
In Tuesday's Fund Spy, Russ Kinnel wondered why Mario Gabelli is interested in acquiring the woeful Mathers Fund MATRX. I'll put the Mathers Fund aside and explore a different angle: In an age of mutual-fund consolidation, if you ran a small, overlooked fund with a good record, should you try to hook up with Gabelli to raise awareness of your fund and gather more assets?
It might seem obvious that you should. Mario Gabelli has one of the most recognizable names (and faces) in the industry. He's one of the esteemed investors included in the annual Barron's Roundtable, he's got TV commercials and print ads, and perhaps most valuable of all these days, he appears regularly on CNBC. He's about as high-profile as a fund personality can get.
But apparently, that isn't enough. The excellent but little-known Westwood funds came under the Gabelli wing a bit more than a year ago, and so far, despite continued strong performance, they haven't gotten much attention. At the end of May, Gabelli Westwood Equity WESWX had $191 million in assets, almost identical to the $181 million it had at the end of February 1998, before it took the Gabelli name. Gabelli Westwood Balanced WEBAX has grown, but it's still at a mere $164 million. And consider a fund that has always been under the Gabelli umbrella, Gabelli International Growth GIGRX. It is four years old and boasts a fine record, but has a piddling $29 million in assets.
Sure, value, balanced, and international funds haven't exactly been the most popular in recent years, but given their records and the Gabelli name, I would still expect these offerings to have gathered a bit more assets than they have.
What gives? Exploring that would take a whole column, but there are some likely explanations. These funds aren't broker-sold (recently the firm said it would begin offering load shares), and Gabelli is associated with value investing at a time when growth has ruled. Then there's Gabelli's penchant for strange ads and promotions. A recent poster the firm sent out that attempts to connect Gabelli Funds with the Star Wars phenomenon seems bound to backfire.
Free Your Mind
I'm always amused when I hear market commentators refer to a "psychologically important" level in the stock or bond market. Just yesterday, the Wall Street Journal's market wrapup story said the 30-year Treasury had been pushed above the "closely watched 6% level." The same thing happens any time the Dow reaches an even thousand (or hundred, not that long ago).
Similarly, currency watchers are worrying that the falling euro, now trading at around $1.03, will hit "parity" with the dollar (i.e., trade at $1.00), which allegedly would be a terrible psychological blow. The people writing or saying these things aren't unsophisticated, either; they're market writers and professional traders.
This interest in round numbers is puzzling. For both fundamental investors and technical analysts, nice round numbers should be irrelevant. When a fundamental analyst studies a company and determines it would be a bargain at a certain price, rarely is that price exactly $50 or $100. Same with technical analysts. So if the pros don't pay attention to round numbers with individual stock prices, why do they for indexes or yields? Why is a 6% yield more meaningful than 5.92% or 6.03%?
My guess is that if questioned, most market writers, managers, and traders would say they don't put any weight on round numbers--it's those other, unsophisticated people who do. And those other people can affect the markets, so that makes the round numbers important.
Here's my suggestion: Forget round numbers. Notice whether bond yields or market indexes are rising or falling, but not if they do or don't hit supposedly critical levels that happen to coincide with even numbers. And if you're reading this in Europe, don't worry about the euro dropping to parity. The U.S. dollar trades far below parity with the British pound, and if that's "psychologically important," most Americans haven't seemed to notice.
Who Says There's Nothing Good on TV?
Here's the opening of a story that appeared in the Financial Times two weeks ago:
"Goldman Sachs, the U.S. investment bank, is hoping to arouse interest in Japan for U.S.-style mutual funds by sponsoring a television show featuring glamorous actresses who explain financial concepts in a fun way."
I'd better leave that one alone.
Stat du Jour
Six. That's the number of times in the past six years that Gabelli Westwood Equity's annual return has landed in the top half of the large-value category.
Help Me, Mario?