Mario Gabelli is one of the oldest figures in the Street. He is known as an American stock investor, investment advisor, and financial analyst. Gabelli is among America's wealthiest figures on Forbes' list, with a net worth estimate of $1 billion.
Gabelli made his fortune through his famous mutual fund company, Gabelli Asset Management Company Investors. GAMCO (GBL) has a defensive investment strategy, where the ratio of equity holdings depend on the contemporary economics conditions. While the returns are not extremely impressive, in the last 10 years GAMCO was able to beat the market with a cumulative return five times higher than the market return. As of last quarter, GAMCO has $14 billion invested in U.S. equities. 28% of the portfolio is invested in cyclical consumer stocks, followed by industrials (19%).
Here is an analysis of three big sells and four big buys by Gabelli (data from finviz, and current as of June 3's close):
Lubrizol Corporation (LZ) is a specialty chemical company. The company supplies technologies and produce additives, ingredients, resins and compounds. As of June 3's close, owning a market capital of $8.64 billion, the company had a forward P/E ratio of 10.86, while earnings increased by 10.49% this quarter. Analysts estimate a 12.36% EPS growth for the next year, and 10.40% for the next five years. P/S is 1.54, and P/C is 11.43.
In terms of forward P/E, PEG, P/S, P/C, and estimated EPS growth values, LZ was a promising stock for the long run. Apparently Warren Buffett noticed a good future in the company. Berkshire Hathaway (BRK.B) will acquire Lubrizol for $135 per share (28% premium over the price of $106 before the announcement).
GAMCO purchased over 1 million shares in the last quarter. Since the acquisition announcement, the stock is trading slightly below $135.
O’Reilly Automotive Incorporation (ORLY) and its subsidiaries are specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States, selling its products to both do-it-yourself customers and professional service providers. Owning a market capital of $8.13 billion, as of June 3's close, the company had a forward P/E ratio of 19.80. Analysts estimate a 32.44 growth for this year, and 15.31 the next five years. P/S is 1.50 and P/C is 35.77.
GAMCO also recently invested in O'Reilly, buying 1.37 million shares. I think it will be a long-term investment, since the growth expectation is pretty high. Institutions are pretty bullish on the company, increasing their holdings by 27.7% in the last quarter. If the stock breaks the upward resistance level, it can test its new 52-week highs.
Beckman Coulter Incorporation (BEC) is a manufacturer and marketer of biomedical testing instrument systems, tests and supplies that simplify, automate and innovate complex laboratory processes. It operates in two segments: Clinical Diagnostics and Life Science. BEC is also among Gabelli’s bold buys. GAMCO increased its BEC holdings by 35.47% in the last quarter. Morgan Joseph, Lazard Capital Gleacher & Company is among the top 10 shareholders that significantly increased their BEC shares.
Analysts estimate a tremendous EPS growth of 49.01% this year, driving the forward P/E ratio to of 29.05. Performance of BEC supports analyst estimates, with an increase of 50.14% in the last six months. There is a 4% short float and 3.10 short ratios. It is one of the highly shorted stocks in the market. Given Gabelli’s bold move, we might see a short squeeze in BEC shorts in the near future. I wonder what are those bearish investors thinking? Danaher (DHR) is expected to acquire Beckman Coulter for $83.5 a share.
Atheros Communications Incorporation (ATHR) is a provider of wireless and wired connectivity semiconductor and system solutions. The company's primary customers include manufacturers of networking equipment, computing devices and consumer electronics for use in both wireless and wired connected products. Atheros was among the newest investments of Gabelli. GAMCO put about $27 million to this stock in the last quarter.
Analysts estimate a tremendous sales growth for last five years with 38.25% this year. Insider transactions supported analyst estimates, with an increase of 70.12% in the last six months. Current ratio is 5.16 and quick ratio is 4.53. Similar to BEC, it was also one of the highly shorted stocks in the market. Too bad for it, Qualcomm (QCOM) completed the acquisition of Atheros. From now onwards, Atheros company will be a wholly-owned subsidiary of Qualcomm, operating under the name Qualcomm Atheros, Inc.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.