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Mario Gabelli is a money manager with a focus on value. According to Morningstar.com, the Gabelli family of funds manages $14.8 billion in assets, not counting its money market funds. Cash holdings across the fund family are estimated to be an additional $1.9 billion. Gabelli's strength is developing a private market estimate for public companies as the benchmark for valuations. For Gabelli, utility investing has been a strong suit. One of his funds, Gabelli Utility Fund, focuses on utilities that either have great fundamentals for earnings growth and dividend increases or are undervalued based on the consolidation taking place in the sector. As most utility sector investors know, the number of utilities has been dwindling as the sector continues on its multi-year consolidation phase. Reviewing Gabelli's utility sector buys and sells for the 1st quarter of 2013 reveals some interesting moves.

The following information is from the most recent SEC 13F filings for Gabelli Funds LLC and from the website whalewisdom.com that compares current with previous holdings

It is easy to comment on the 13,500-share addition of largest position in the Gabelli Funds of National Fuel Gas (NYSE:NFG) worth $810,000 and assume that Gabelli still sees value in it at the current price. However, as a percentage of the 3.9 million shares worth $239 million already owned, this purchase is a bit inconsequential. The table below lists purchases and sales of 1% or greater of a position in Gabelli's utility sector portfolio during the 1st quarter:

Company

Sybl

Shares Held

Market $

Change Shrs

Change %

Consol Energy

CNX

1,989,000

$66,929,853

89,000

4.7%

ITC Corp

ITC

27,000

$2,410,020

1,000

3.8%

Duke Energy

DUK

910,001

$66,056,969

29,980

3.4%

Otter Tail

OTTR

858,000

$26,718,000

10,000

1.2%

AES Corp

AES

4,650,074

$58,451,429

45,000

1.0%

Am Electric Power

AEP

1,367,191

$66,486,500

(15,000)

-1.1%

TECO Energy

TE

1,523,032

$27,140,430

(17,000)

-1.1%

Allete INC

ALE

431,000

$21,127,620

(5,000)

-1.1%

Consolidated Edison

ED

648,050

$39,550,491

(8,500)

-1.3%

Southwest Gas

SWX

1,937,000

$91,930,018

(26,000)

-1.3%

Pinnacle West

PNW

524,000

$30,334,360

(9,000)

-1.7%

Westar Energy

WR

2,028,000

$67,289,041

(35,000)

-1.7%

EOG Resources

EOG

276,600

$35,424,164

(5,000)

-1.8%

South Jersey

SJI

93,000

$5,169,870

(2,000)

-2.1%

Nisource

NI

493,000

$14,464,620

(12,000)

-2.4%

Dominion Resources

D

441,300

$25,674,834

(11,000)

-2.4%

CH ENERGY

CHG

703,279

$45,987,413

(21,321)

-2.9%

OGE Energy

OGE

846,500

$59,238,073

(29,000)

-3.3%

Northeast Uts

NU

2,138,230

$92,927,474

(78,000)

-3.5%

Am Water Works

AWK

428,000

$17,736,319

(21,000)

-4.7%

AGL Energy

AGL

323,764

$13,582,000

(16,000)

-4.7%

Excelon

EXC

1,212,000

$41,789,759

(88,000)

-6.8%

Southern Co

SO

618,000

$28,996,559

(54,000)

-8.0%

The list included the following purchases: Consol Energy (NYSE:CNX), ITC Corp (NYSE:ITC), Duke Energy (NYSE:DUK), Otter Tail (NASDAQ:OTTR), AES Corp (NYSE:AES).

The list includes the following sales: Am Electric Power (NYSE:AEP), TECO Energy (NYSE:TE), Allete INC (NYSE:ALE), Consolidated Edison (NYSE:ED), Southwest Gas (NYSE:SWX), Pinnacle West (NYSE:PNW), Westar Energy (NYSE:WR), EOG Resources (NYSE:EOG), South Jersey (NYSE:SJI), Nisource (NYSE:NI), Dominion Resources (NYSE:D), CH ENERGY (NYSE:CHG), OGE Energy (NYSE:OGE), Northeast Uts (NYSE:NU), Am Water Works (NYSE:AWK), AGL Energy (AGL), Exelon (EXC), and Southern Co (NYSE:SO).

As these transactions are lumped together with all other Gabelli Funds, it is difficult to sort out which fund did the buying or selling until each fund's holdings are published. The intriguing aspect of this list is a specific security could be sold in one fund and bought in another. For instance, a stock could be sold in the Income Fund and bought in the Utility Fund. Investors focused only on the Utility Fund holdings may think the position is being increased and Gabelli likes the position when in fact the total fund family is reducing its exposure. By reviewing the fund family as a whole, investors acquire a better picture of Gabelli's overall investment movements.

The transactions with the largest change in ownership over 2% account for 14 of the 23 positions.

Of particular interest are the buys of CNX, ITC and DUK. The reductions in holdings of AWK, AGL, EXC and SO are also fascinating. Each could be explained as follows:

  • Based on growth prospects CNX, ITC (FERC-regulated electricity transmission) and DUK (merger related issues) are undervalued;
  • Based on current valuations, AWK (5-yr highs) and AGL (5-yr highs) are overvalued;
  • EXC has operational issues based on its merchant power exposure and it may be years before the market turns;
  • SO has increasing exposure to cost overruns of its nuclear power plant construction projects.

While utility investors should not blindly follow the lead of money managers, analyzing their buys and sells may provide greater insight into the sector. Investors should review their premise for additional purchases of companies that are being sold by long-term oriented money managers and may benefit from researching those companies being purchased.

Author's Note: Please review important disclaimer in author's profile.

Source: Should You Follow Gabelli In Terms Of Utility Sector Buys And Sells?