Mario Gabelli appeared on CNBC yesterday, and among other things, spoke, as he often does, about spinoffs. The CEO of Gamco Investors spoke about his success with recent spins such as Fortune Brands Home & Security(FBHS), Beam, Inc.(BEAM) and Xylem(XYL). Gabelli also spoke about Pepsi(PEP) as a potential split that he likes.
Gabelli explained why he likes spinoffs
he wants to invest in companies that have a history of splitting off successful businesses, or could split off businesses, and then invest in both companies.
“What we do is not complicated,” he said. He looks at the world and wonders what it’s going to look like over the next 10 years “and then we do stock analysis covering sectors globally.”
The mantra of the 1960s was conglomeration, but today the focus is on growth, he said.
“How do you take a company and take its capital and move it to its highest rate of return? Split-ups are an example of that,” Gabelli said. “We look at finding the company that was spun off and say, is this attractive?”
Disclosure: The author holds no position in any stock mentioned