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Summary: GAMCO Investors, Inc. headed by Award Winning Money Manager Mario Gabelli has returned 16.3% annualized since inception in 1977 using a value investing philosophy. His major new conviction buys and holds include packaged foods manufacturer Sara Lee Corp. (SLE), gas utility National Fuel Gas Co. (NFG) and medical supplies provider Becton Dickinson & Co. (BDX).
Rye, New York-based GAMCO Investors, Inc., formerly known as Gabelli Asset Management Company [GBL] was founded in 1977 by Mario Gabelli, and manages over $30 billion in assets, including $13.5 billion invested in equities, for its Institutional clients, mutual funds and closed-end funds. Besides his role as the founder and CEO at GAMCO, he is also well known as a frequent commentator on CNBC and CNN, and is often written about in the financial print media, including Institutional Investor, Business Week, Fortune, Forbes, and Money. He was recently selected by Institutional Investor Magazine as 2011 Money Manager of the Year. He is a disciple of the Graham-Dodd school of security analysis, and uses value investing principles in making his investment decisions. Since inception in 1977, GAMCO has returned 16.3% annualized return versus 12.3% for the S&P 500, including returning 28.6% for its Institutional clients in 2010.
The fund holds a diversified portfolio of 807 positions, including 35% each of their holdings in large-caps and mid-caps and the remaining 30% in small-cap equities. Their portfolio turnover is around 15% implying an average holding period of six years. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that their portfolio is overweight in the Services, Basic Materials and Consumer Sectors, and it is underweight the Energy, Healthcare and Technology Sectors.
The following summarizes their largest new buys and sells in the latest reported 13-F filing for the March 2011 quarter, and updated based on any 13-G filings since the end of the quarter:
  • Services Sector: They added a net $90 million to their $3.8 billion position in the Services Sector, including adding a new position in automotive parts retailers O’Reilly Automotive Inc. (ORLY). Also, they unloaded a minor $40 million of their $1.6 billion holdings in Broadcasting and Cable TV group, including $8 million in Cable TV Company Cablevision Systems CLA (CVC), selling $10 million in satellite-based digital TV provider DirecTV, and selling $3 million in Viacom Inc. (VIAB).
  • Basic Materials Sector: They added a strong $184 million to their prior $1.3 billion holdings in the Basic Materials Group, including their largest new position at $143 million in specialty chemicals manufacturer Lubrizol Corp. (LZ) that was acquired at a 30% premium by Berkshire Hathaway (BRKA), and adding $31 million to their $16 million position in Alcoa Inc. (AA) that is engaged in the production and management of aluminum, fabricated aluminum, and alumina.
  • Healthcare Sector: They added a net $24 million to their $470 million holdings in the Healthcare Group, including adding to their positions in Beckman Coulter Inc. (BEC) and French pharmaceutical Company Sanofi (SNY). BEC is under acquisition by Danaher (DHR), a manufacturer of water treatment and vapor recovery systems, fuel dispensers, digital imaging systems and test products. They also added $29 million to their prior $2 million position in Becton Dickinson & Co. (BDX), a developer of medical supplies, devices, instrument systems and reagents used by healthcare institutions. Also, they sold out of a $24 million position in Covidien Plc (COV), an Irish developer of medical devices, pharmaceutical and imaging products and medical supplies for clinical and home settings. This position was initiated in mid-2009 in the low-$40s, so the selling in the mid-$50s almost two years later is profit-taking.
  • Consumer non-Cyclical Sector: They added a net $60 million to their $1.25 billion position in the sector, including doubling their prior $53 million position in Sara Lee Corp. (SLE), a manufacturer of meats, coffee, teas, household products and baked goods for consumers worldwide. The position was initiated in late 1999 in the low-$20s and they have been on the wrong side ever since with the stock dropping as low as $7 in early 2009 and rising to $20 recently, so their doubling their position after all that volatility is a conviction in their buy decision.
  • Utilities: They continued to hold about $330 million in the group, with National Fuel Gas Co. (NFG), a holding company providing gas utility services to NY and PA customers, continuing to be among their largest positions in the group and their portfolio at $226 million. The position was in 2000 in the teens, and has goes gone up almost four-fold since. GAMCO took only a minor $4 million of the $230 million position off the Table indicating their conviction in the uptrend move and in their hold decision.
Table
Company
Ticker
Action
Market Value at end of March 2011 Quarter
Change in Value from Prior Quarter
Percent of Portfolio
Percent Shares Owned
Largest Buys and Sells
Lubrizol Corp.
LZ
New
$ 143 million
$143 million
1.03%
1.66%
O Reilly Automotive Inc.
ORLY
New
$ 79 million
$79 million
0.57%
1.00%
Bucyrus Intl Inc.
BUCY
Add
$ 123 million
$62 million
0.89%
1.65%
Sara Lee Corp.
SLE
Add
$ 103 million
$50 million
0.75%
1.00%
Beckman Coulter Inc.
BEC
Add
$ 90 million
$45 million
0.65%
1.51%
Sanofi
SNY
Add
$ 44 million
$38 million
0.32%
0.05%
Alcoa Inc.
AA
Add
$ 47 million
$31 million
0.34%
0.25%
Becton Dickinson & Co.
BDX
Add
$31 million
$29 million
0.23%
0.18%
Atheros Comm. & Co.
ATHR
New
$27 million
$27 million
0.20%
0.83%
Covidien Plc
COV
Drop
$0 million
($24) million
0.00%
0.00%
Largest Holdings
Cablevision Systems Corp.
CVC
Cut
$ 318 million
($8) million
2.30%
3.94%
DirecTV
DTV
Cut
$ 274 million
($9) million
1.98%
0.76%
Viacom Inc.
VIAB
Cut
$ 226 million
($3) million
1.59%
7.43%
National Fuel Gas Co.
NFG
Cut
$ 226 million
($4) million
1.63%
3.69%
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Sector-Based Buys and Sells of 2011 Money Manager of the Year Mario Gabelli of GAMCO