Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Gabelli Funds, the mutual-fund and closed-end fund arm of GAMCO Investors and familiar to many because of Mario Gabelli, the well-known value investor. Indeed, the folks at Institutional Investor named him Money Manager of the Year in 2011, citing an average annual return of 16.3% for his GAMCO Investors since its inception in 1977. That's darn impressive.
The company's reportable stock portfolio totaled $16.4 billion in value as of March 31.
So what does Gabelli Funds' latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Liberty Media and Acme Packet. Other new holdings of interest include Cliffs Natural Resources (NYSE: CLF ) and payment processor VeriFone Systems (NYSE: PAY ) . Cliffs' stock is down more than 60% over the past year, and its 3.4% dividend yield is the result of a 76% dividend cut earlier this year. The company has struggled along with the coal market, but some are optimistic, seeing coal prices rebounding and demand growing, especially abroad. The stock has fallen so far that some see it as attractive now, but others worry about significant debt and negative free cash flow. On the plus side, Cliffs just inked a long-term iron-ore-pellet deal.
VeriFone has seen its stock roughly halved over the past year, as it has repeatedly posted disappointing quarterly results and weak guidance. Indeed, earlier this month, its latest results sent shares down some 20%. The company has an interim CEO at the moment, and bulls like a recent deal with China that bodes well for growth prospects abroad. With a single-digit forward P/E ratio, it's seen as attractive by some, and as a possible acquisition target.
Among holdings in which Gabelli Funds increased its stake was snack seller Diamond Foods (NASDAQ: DMND ) , which recently posted a surprising gain instead of an expected loss. Some have worried about shrinking nut sales and have seen the company as a possible acquisition target, while others think the company might want to do some shopping of its own. Diamond is also recovering from accounting-related troubles.
Gabelli Funds reduced its stake in lots of companies, including rare-earth-materials specialist Molycorp (NYSE: MCP ) , which is down more than 70% over the past year. It has been struggling in a tough environment and worried investors earlier this year with a surprisingly large share offering and debt issuance. Some also worry that it will run out of money before its market turns around. It posted lower-than-expected losses recently, but they're still losses, and competition looms. Meanwhile, the company plans to beef up production, which could put pressure on pricing.
Finally, Gabelli Funds' biggest closed positions included Ralcorp Holdings and Robbins & Myers. Other closed positions of interest include network performance specialist Riverbed Technology (NASDAQ: RVBD ) , which gobbled up OPNET last year. The company earned an upgrade to a "buy" rating from Lazard analyst Ryan Hutchinson, based on expected synergies with OPNET and anticipated strength in federal spending. Riverbed offers a lot of promise along with a lot of uncertainty.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.
Cliffs Natural Resources has grown from a domestic iron ore producer into an international player in both the iron ore and metallurgical coal markets. It has also underwhelmed investors lately, especially after its dramatic 76% dividend cut in February. However, it could now be looked at as a possible value play because of several factors that are likely to remain advantageous for Cliffs' management. For details on these advantages and more, click here now to check out The Motley Fool's premium research report on the company.