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Billionaire money manager Mario Gabelli is a noted value investor in the tradition of Graham and Dodd and renowned for his research-driven equity investment style. His Gamco Investors hedge fund has $32 billion in assets under management and he's spread that out over more than 800 stocks.
Gabelli employs a strategy that he calls private market value (PMV) with a catalyst. It essentially means the price a private investor would pay to acquire the whole company (the PMV). He then looks for stocks selling below that value and seeks out a catalyst, or some event that could cause the value to rise substantially over time.
A catalyst could be a sale or spinoff of a business, a merger, industry consolidation, or even some regulatory change. It is an important component of the stock discovery process because a stock with a below-market valuation, but no catalyst, will continue to languish.
While Gabelli's methodology is proprietary, he focuses more on a company's cash flows than its accounting profits. And his tactics have been successful. Since its 1977 inception date, Gamco Investors has achieved impressive annualized returns of 16.3%.
In the second quarter, Gabelli was selling down most of his holdings, though he didn't close out any positions. He did, however, buy more of just a handful of stocks. Below are the two he increased his position the most in.
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- Mario Gabelli is a famed value investor who uses a proprietary private market value with a catalyst investment strategy to find stocks trading at a discount that have the potential to soar.
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Grupo Televisa (TV)
Television production studio
Grupo Televisa ( NYSE:TV ) is not the biggest holding in Gabelli's portfolio -- though with 870 stocks, no one position dominates anyway -- but it was the one with the largest percentage increase in shares for the period.
The company is the leading telecom stock in Mexico, with segments also servicing the cable TV and pay TV markets. But it is a highly competitive one that is currently battling on price. America Movil ( NYSE:AMX ) has been cutting prices to gain share, but Grupo Televisa raised prices, which resulted in a net loss of 66,000 customers in the second quarter. It hasn't helped that the Mexican peso has weakened also.
Grupo Televisa stock is down 12% in 2024, even after recently bouncing 50% higher off its early September lows. Gabelli likely sees several catalysts for the telecom's turnaround. The company is participating in the industry consolidation under way, acquiring from AT&T ( NYSE:T ) its 41% interest in Sky Mexico , which gives Televisa full control of the company. It also owns a 45% stake in a joint venture with Univision, the largest Spanish-language media company, called TelevisaUnivision. There is the potential for the JV to go public .
TV stock does trade at very discounted valuations, going for just a fraction of its sales and book value, and an extremely deflated 2x the free cash flow it produces. If the catalysts play out, Gabelli just might see its PMV rise significantly.
He increased his stake by 1.2 million shares in the quarter, giving him a total of 15.9 million shares valued at $44 million.
National Fuel Gas (NFG)
Natural gas flame on a stove
The second largest percentage increase in stock Gabelli had during the period was for National Fuel Gas ( NYSE:NFG ), a diversified natural gas company targeting the Appalachian region of the U.S. for exploration and production, pipelines, storage, gathering, and utilities.
Although a small player in the industry with a $5.5 billion market valuation, National Fuel Gas has been a reliable dividend stock for investors. It began paying a dividend in 1902 and has maintained a consistent record of making payouts for over 120 years. More impressively, the natural gas company is a Dividend King , or a stock that has raised its dividend for 50 or more years. National Fuel Gas has increased its payment for 54 straight years, a record only very few companies share.
NFG stock is up 22% this year and could keep rising. The U.S. Energy Information Administration forecasts consumption, prices, and production to all rise through the winter months and on into 2025.
Gabelli added more than 44,000 shares to his position, giving him 1.37 million shares total, worth $74 million. But his average buy price is $62 per share, so he is showing a small loss at the moment. Although NFG stock is up sharply year-to-date, shares still trade almost 20% below their June 2022 highpoint.
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