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Value Investing Congress: Investing with Conviction

Chris Preston

By his own admission, Dan Miller looks like he’s about 12 years old. Nevertheless, he presides over an investment firm of 35 analysts, called Gabelli Funds .

Miller talked about his mutual fund at the Value Investing Congress today. The fund invests in between 25 and 35 companies, with 50% of the capital in five positions. Gabelli only invests in companies with an identifiable catalyst in the next three to 18 months. “Investing with conviction,” Miller calls it.

Miller presented three investment ideas about which he has strong convictions:

Real D (RLD):

  • $330 million company
  • Manufactures device that converts 2-D images to 3-D, sells it to movie theaters. Studios pay roughly $5 million for this conversion.
  • The stock trades at just under $7, only 5.5 times EBITDA.
  • The company is in the process of cutting operating costs after a rough summer for box-office sales.
  • The company is likely to authorize a share buyback in the coming months.
  • Miller thinks the stock is worth $13, close to double its current price.

InterNap (INAP)

  • $340 million market cap
  • A provider of cloud computing and other IT services
  • Focused on online advertising, media and healthcare firms
  • Trading at 10 times earnings – a significant premium for the technology space

Guidance Software (GUID)

  • $224 million market cap
  • Software company that specializes in digital forensics, security analytics, incident response and e-discovery. The CIA and Department of Defense are among its clients.
  • Company was affected by sequestration, driving down earnings last quarter.
  • Announcing a new cybersecurity product in the next month
  • Stock is worth $16, nearly double its current share price

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