Mario Gabelli's 2008 Best of Breed Stocks - Barron's

Barron's 2008 Roundtable participant Mario Gabelli of Gamco Investors chimes in with his picks for 2008. Stocks he likes:

• Genuine Parts (GPC) - you're paying 14x earnings for a company that will grow earnings 10% or 11%, with a $1.46/share ($43) dividend. Average U.S. car age is 9.6 years, just about in line with the parts replacement sweet-spot of 10 years. GPC is buying back 1-2% of its shares each year.
• EnergySouth (ENSI) - a 'gas hotel' that develops underground natural-gas storage caverns, from which it makes about half its revenue. The other half comes from gas distribution. Because natural gas is a clean fuel, it fits with Mario's "Gabelli green" theme of energy efficient stocks.
• EchoStar (DISH) - AT&T probably will offer 1.1 to 1.2 shares ($36/share) per EchoStar ($33.48) share in order to challenge Verizon's (VZ) FiOS triple-play (phone, internet, TV) strength. EchoStar's balance sheet will go from $4.6B in debt to $600M cash in the next 3-4 years.
• DirecTV (DTV) - EPS of $1.20 for this year will go to $2 in 2010; the company will also go from $600M in debt to about $3.5B in cash. Shares ($21.50) could be worth $40-45 in three years, especially with Liberty Capital's (LCAPA) John Malone's controlling stake.
• Cadbury Schweppes (CSG) - once it spins off its beverage business in the spring, it is a buy at 15x EPS and a total value that is less than the sum of its parts. After that, Gabelli sees Hershey (HSY) making a play for the chocolate company.
• Great Atlantic & Pacific Tea Co. (GAP) - consumers will stop eating out, and in the 2% margin supermarket business, inflation can have a significant impact. Gabelli also likes Safeway (SWY), especially its Blackhawk division's 80% growth in prepaid gift cards.
• Lin TV (TVL) - with the elections and the Olympics, 2008 will bring a tsunami of ad spending.

Comments

[Manifest:]

Eli, could you expand on the comment that Gabelli has never had a stock "go down over the following year?" I've followed the Barron's RoundTable for years and don't see how this could be possible. Are you talking about recent years? (I've not monitored over the last few)

2008 Jan 21 09:08 AM

[SA Editor E...:]

Good question, Manifest. That was the wording of Barron's interviewer, who was perhaps being facetious. Clearly, however, Gabelli has had losers. I have edited the summary. Thanks.

2008 Jan 21 09:39 AM

[bs_clobberer:]

quoting you:

EnergySouth (ENSI) - [...] Because natural gas is a clean fuel [...]

NatGas burns cleaner than coal [no nitrogen or sulfur oxides], but it is a greenhouse gas [lots of CO2 into the atmosphere]. WE WILL KILL OURSELVES UNTIL WE REALIZE THAT NUCLEAR IS THE ONLY SOLUTION FOR BREATHABLE AIR [no CO2]

2008 Jan 21 11:03 AM

[MyTopTen1!:]

Anyone know of a good nuclear energy play? I agree that there are some definite benefits to nuclear energy that are under-appreciated at this time!

2008 Jan 21 12:50 PM