Mario Gabelli, frequent guest/commentator on CNBC and Barron's among others, is the founder, CEO and Chairman of Gabelli Asset Management Company Investors [GAMCO]. Gabelli was selected by The Institutional Investor as the 2010 Money Manager of the year. His individual net worth has been estimated by Forbes magazine at $1,000,000.00. As part of this year's Barron's Roundtable Gabelli recently divulged his ten favorite stocks for this year. We thought it would be a worthwhile exercise to discuss his ten selections and see if we are in agreement - here are Gabelli's first five picks:
Boulder Brands, Inc. (BDBD)
Boulder is a $794 million market cap company that trades 422,000 shares per day. Boulder is a consumer food products company. Gabelli seems to have three angles on Boulder - first he likes the Glutino brand that they acquired that features gluten free foods, second, he likes that the company is run by Steve Hughes (his old shareholders profited when he sold Celestial Seasonings to Hain), and, third, he sees the company being able to leverage the assets it now has with the possibility that a larger company will take them out. Gabelli sees $0.15 in earnings for 2012 but then sees earnings going "straight up" as start up expenses diminish and advertising expense is spread over a larger stable of brands. We like the Boulder story and think the company is a "buy".
Fischer Communications, Inc, (FSCI)
Fischer is a $309 million market cap company that trades only 43,000 shares per day. Fischer is a television and radio broadcaster. Gabelli's interest in Fischer is as a takeover play. Among others it owns and operates the ABC affiliate television stations in Seattle and Portland, Oregon. The stock is selling for close to $35 and Gabelli feels the company could be worth $40 to $45 per share. While we doubt that anyone knows more about media companies and assets than Gabelli we have to pass on this one as we never buy a stock just on the prospect of a takeover rather we need to see another readily available avenue for upside in case the takeover fails to materialize.
Graco, Inc. (GGG)
Graco is a $3.34 billion market cap company that trades an average of 243,000 shares per day. Graco designs, manufactures and markets systems to pump, meter, mix and dispense fluids and semi-solids worldwide. Gabelli likes the "razor and razor blade" model that the company follows and thinks it is a great cash generator. Gabelli feels earning per share could double from the current $2.20 in the next two to three years basically as a play on housing. We like the Graco story and think the housing recovery has a long time to play out.
Hillshire Brands Company (HSH)
Hillshire is a $3.70 billion market cap company that trades 1,378,000 shares per day. Hillshire is a consumer food products company that primarily deals in meat and sausage related products. The company was spun out of Sara Lee. Gabelli's bull thesis is two fold - he sees earnings increasing from about $1.60 this fiscal year to about $2.40 in fiscal 2017 and says that three or four companies were looking to buy Hillshire before the spinoff. Gabelli sees the stock going from its current $30 to $35-$50 in two years. We like the Hillshire story and think the stock rates a buy rating.
National Fuel Gas Company (NFG)
National Fuel is a $4.49 billion market cap company that trades 342,000 shares per day. National is a diversified energy company with three major components - natural gas exploration and production primarily in the Marcellus , a gas utility in Buffalo and some midstream assets, Gabelli sees no reason that the company cannot be split up. He thinks the midstream assets could be put into an MLP that would be worth $20-$25 per share. Gabelli further thinks that if natural gas prices rise to $4.50 per Mcf that the stock doubles to $100 per share. In the interim the company pays you to wait with a dividend just under 3%. We would note the company also has other assets like timberland that they could monetize. We endorse this Gabelli pick as it fits into our policy of having more than one reason to buy a stock.