I’m thrilled to sit down with Marco Gaietti, a veteran in the world of investment strategies with a sharp focus on value investing through closed-end funds and holding companies. With decades of experience in management consulting, Marco brings a wealth of knowledge in strategic business management and a unique perspective on uncovering hidden value in complex corporate structures. Today, we’ll dive into his approach to investing like a billionaire at a discount, exploring how he targets undervalued assets, navigates intricate holding companies, and practices patience in markets ranging from Europe to Japan.
Can you share a bit about your journey into value investing and what sparked your interest in this field?
Thanks for having me. My journey into value investing started early in my career when I worked on analyzing real estate assets for a wealthy family. That role opened my eyes to how public and private holdings can be undervalued or misunderstood by the broader market. I was drawn to the idea of finding intrinsic value where others saw complexity or risk. Over time, I honed my focus on holding companies and investment trusts because they often trade at significant discounts to their true worth, offering a unique opportunity to capitalize on market inefficiencies.
What specifically drew you to specialize in holding companies and closed-end funds as investment vehicles?
Holding companies and closed-end funds are fascinating because they’re often overlooked or mispriced. Many investors shy away from them due to their complex structures or because they don’t fit neatly into standard investment categories. For me, that’s exactly where the opportunity lies. These entities frequently control high-quality assets—whether it’s stakes in major corporations or real estate—that are worth far more than the market price reflects. It’s like buying a dollar for fifty cents if you can see through the noise.
Can you explain the core strategy behind targeting companies trading at a discount to their liquidating value?
Absolutely. The core idea is to identify companies whose market price is significantly lower than the value of their underlying assets if they were to be sold off or liquidated. We look at what’s on the balance sheet—cash, stakes in other businesses, real estate—and compare that to the stock price. If there’s a wide gap, we see potential. The goal isn’t necessarily to push for liquidation but to invest in situations where that discount can narrow over time, whether through market recognition, management action, or structural changes.
How would you describe the concept of ‘liquidating value’ to someone who’s just starting to learn about investing?
Think of liquidating value as the amount of money you’d get if a company sold off everything it owns—its buildings, investments, inventory, everything—and paid off its debts. It’s essentially the net worth of the company if it shut down and turned everything into cash. When a company’s stock trades below this value, it means the market is pricing it less than what its pieces are worth. That’s the kind of bargain we hunt for, because eventually, something—be it a buyout, restructuring, or just better investor awareness—can close that gap.
What makes holding companies controlled by billionaire families so appealing as investment targets?
These companies are often attractive because they’re built on strong, long-term assets curated by families who’ve proven their ability to create wealth. Think of major conglomerates in industries like automotive, luxury goods, or media. The catch is that their structures can be complicated with layers of cross-holdings, which turns off many investors. That complexity creates discounts to their real value. Plus, these families often have incentives—like tax strategies or control mechanisms—that keep the structure intact, but as minority shareholders, we can still benefit when the market wakes up to the underlying worth.
How do you determine which of these billionaire-controlled entities are worth the investment risk?
It’s about balancing the potential reward with the behavior of the controlling family. We look for families that, while protecting their own interests, don’t exploit minority shareholders. Historical actions matter—have they simplified structures, bought back shares, or unlocked value in the past? We also analyze the quality of the assets they hold. If the portfolio is strong and the discount is wide, we’re willing to be patient. It’s a deep dive into both numbers and governance to ensure we’re not stepping into a trap.
You’ve described certain media giants as holding companies rather than just operating businesses. Can you walk us through how you see their value differently?
Sure. Take a company often viewed as a media business. Most people focus on its news or entertainment operations, but when we dig deeper, we see it as a holding company with diverse, valuable stakes. For instance, owning a significant chunk of a thriving real estate platform or other non-core assets can be worth more than the market gives credit for. We strip away the headline business narrative and value each piece separately. Often, the sum of those parts far exceeds the stock price, revealing a hidden bargain.
Your strategy seems to hinge on patience while waiting for market discounts to narrow. How do you keep investors on board during these waiting periods?
Patience is indeed key, and communication is how we maintain trust. We make sure our investors understand the logic behind each position—why we believe the discount exists and what catalysts could close it. We also show historical examples of when waiting paid off. It’s about building a shared vision of long-term value. Markets can be irrational for a while, but we focus on the fundamentals and keep our shareholders informed every step of the way.
Can you tell us about your approach to what you call ‘activism lite’ in markets like Japan, and how it differs from more aggressive strategies elsewhere?
In Japan, we take a softer approach compared to the more confrontational activism you might see in the U.S. or U.K. Japanese corporate culture values harmony and long-term relationships, so being overly aggressive as a shareholder can backfire. Our ‘activism lite’ means engaging with management quietly, suggesting ideas like asset sales or share buybacks to unlock value, while respecting their perspective. It’s about nudging rather than demanding, and it works better in that cultural context.
What are some examples of Japanese companies where you’ve identified significant hidden value?
We’ve looked at companies in sectors like logistics and pharmaceuticals where the market cap is close to or even below the value of their real estate or other non-operating assets. Essentially, you’re getting the core business for almost nothing. These firms often have conservative management that’s sitting on cash or undervalued holdings. By engaging constructively, we aim to encourage small changes that can reveal that hidden value to the market over time.
Looking ahead, what is your forecast for the opportunities in value investing, especially with holding companies and closed-end funds?
I’m optimistic about the space. As markets become more volatile and investors chase short-term trends, the inefficiencies in pricing holding companies and closed-end funds are likely to persist or even grow. There’s always going to be complexity that scares off the average investor, and that’s where we thrive. I expect more opportunities in regions like Japan, where structural reforms are slowly taking hold, and in Europe, where family-controlled entities continue to dominate certain sectors. The key will be staying disciplined and patient to capture those discounts as they narrow.
