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 $17.6 billion in value as of Sept. 30, 2013.
So what does Gabelli Funds' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Twenty-First Century Fox and ONYX Pharmaceuticals. Other new holdings of interest include BlackBerry (NYSE:BB) and Hertz Global Holdings (NYSE:HTZ). Smartphone titan of yore BlackBerry has fallen on hard times, but for some investors it has fallen so far that it's now attractive. New CEO John Chen, who helped turn Sybase around, is a promising change -- particularly because he's receiving restricted stock valued at $85 million that vests over five years. For a while, it looked like the company might be taken private or that its assets would be sold off, but for now it's remaining an ongoing public concern. Deutsche Bank analysts recently upgraded it from sell to hold, but it remains quite a speculative proposition, with shrinking free cash flow. Some think it has a lot of life left, with more than $2 billion in cash, but others see little value in the company beyond its patents.
Hertz Global Holdings, meanwhile, is more than just a renter of cars -- it's also into renting equipment. Its brands include not just Hertz but also Dollar, Thrifty, and Firefly. It recently lowered its near-term projections, seeing weak rental demand, and its stock took a hit. Still, consolidation in car rentals bodes well for Hertz. The company recently scored a prestige and marketing win by announcing plans to offer Tesla cars in its lineup. It also posted strong revenue growth in its third quarter, but its stock sank 10% on news of a deal gone bad, making some see the stock as a good value now.
Among holdings in which Gabelli Funds increased its stake was MAKO Surgical (UNKNOWN:UNKNOWN), which posted shrinking revenue and widening losses in its third quarter recently. More important, though, is that MAKO is being bought by Stryker. MAKO has also made a recent acquisition of its own, an orthopedic business. MAKO Surgical bulls have wanted to see its robotic surgical equipment approved for more kinds of procedures, which could drive sales considerably. Bears have questioned the future of robotic surgery, but Stryker must believe in it.
Gabelli Funds reduced its stake in lots of companies, including Qualcomm (NASDAQ:QCOM). Qualcomm is a top player in the smartphone world, supplying iDevices and Android devices alike with its chips. The company's fourth-quarter report was mixed, with revenue up 33%, but earnings up only 18%, below estimates. Bulls like Qualcomm's expansion into health care and telemedicine, while bears worry about competition from Intel (NASDAQ:INTC), among others. (Intel has been moving more strongly into the mobile arena, in part via Microsoft's Surface tablets.) Qualcomm hiked its dividend by 40% earlier this year, and its yield is now at 2%. Its dividend has been growing by more than 20% annually in recent years.
Finally, Gabelli Funds' biggest closed positions included Lufkin Industries and News Corp. Other closed positions of interest include solar energy inverter maker Power-One, which has been acquired by Switzerland-based power and automation technology giant ABB. Solar energy is compelling to many investors, but it's been a volatile industry, with some companies suffering and others making investors lick their chops.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.