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Gabelli Starts off New Year with a Bit More Pep, Increases Pep Boys Stake
Posted by: Dianne Tordillo (IP Logged)
Date: January 2, 2013 05:01PM
Today, GAMCO’s Mario Gabelli has reported increasing his stake in auto service company, Pep Boys – Manny, Moe & Jack (PBY) by 14.02 percent, according to GuruFocus Real Time Picks.
The transaction places him at 8.65 percent ownership of the company’s outstanding shares.
The value investing Guru first acquired Pep Boys in the fourth quarter of 2008, starting off with 1.4 million shares, purchased at an average price of $4.11. The stock has surged significantly since then. Trading at $9.85 today, the stock is up 0.41 percent about half an hour before market close.
Gabelli currently owns 4,590,887 shares of Pep Boys, after his latest purchase, compared to his 3.4 million shares in the third quarter of 2012.
Based in Philadelphia, Pep Boys is an auto retail chain known for its automotive maintenance and repair services, name-brand tires and expert auto advice. In 2012, it reached its peak price in February and its lowest in May. For the year, it declined 10.45 percent in value.
In its latest earnings filing, it reported a decrease in sales by 2.4 percent but a gain in customer transactions and recovering tire margins by 3.4 percent. Recently, the company expanded its ecommerce segment, making available online service appointment scheduling, which is just the beginning of its efforts to integrate its entire list of service offerings and store merchandise to the company’s “emerging digital capabilities.” (View its latest Investor Presentation here).
Last November, Gabelli appeared on Bloomberg radio segment, Bloomberg Surveillance, and discussed his confidence in Pep Boys.
“How do I make 50 percent back for my clients in the next 12 months? The answer is, you take a company like Pep Boys… they’re going to have some short-term negatives but they have a good balance sheet [and] good business model in the sense of selling tires… Pep Boys, I think, will be sold within 12 months,” he said.
About a month after the interview, Gabelli reported increasing his Pep Boys stake by 18.89 percent.
In December, Pep Boys announced a $50 million stock repurchase program, which includes the SEC’s Rule10b5-1 trading plan, which would enable the company to repurchase its shares during periods outside of its normal trading windows.
“Based on current market prices, we believe that our stock is undervalued and that the repurchase program is a good investment of available cash on hand and future cash flows,” Pep Boys president and CEO, Mike Odell, said in a Dec. 12 news release.
In its 10-Year financials, Pep Boys has maintained a 62.6 percent free cash flow growth rate in the past 12 months. Its book value has grown 6 percent in the same time frame, as well as 2.9 percent in revenue.
Ranked 1 star in Business Predictability, GuruFocus rates Pep Boys 6 in Financial Strength and 7 in Profitability and Growth. It has a P/E (ttm) ratio of 22.3, a P/B ratio of 0.9 and a P/S ratio of 0.3.
Besides Gabelli, other Gurus who have stake in Pep Boys include Donald Smith, Jim Simons, Jeremy Grantham and Jean-Marie Eveillard.
To view the rest of Gabelli’s latest trades, go to Mario Gabelli’s Stock Picks. Also view his undervalued stocks, his high yield companies and his top growth stocks.
To read more on relevant topics, visit the following GuruFocus articles and submissions:
Pep Boys: “Everything for Less,” Even Its Stock Price
A Buyout Offer! Now What?
Mario Gabelli Discusses Small Caps and Fiscal Cliff
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Guru Discussed: Mario Gabelli: Current Portfolio, Stock Picks
Stocks Discussed: PBY,