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Stocks Mario Gabelli Keeps Buying - One That Paulson Likes Too

Federico Flom

Federico Flom

6 followers
Mario Gabelli is the chairman and CEO of Gabelli Asset Management Company Investors (GAMCO), a global investment firm headquartered in Rye, NY.

The company was founded in 1977 as an institutional broker-dealer.

Gabelli holds an MBA degree from Columbia University Graduate School of Business, and an Honorary Doctorate Degree from Roger Williams University in Rhode Island. In addition, he wrote many articles for Institutional Investor, Business Week, Fortune, Forbes, Money and Changing Times.

He is known for applying Graham & Dodd's principles in studying domestic, cash generating, franchise companies in a wide range of industries.

It is interesting to analyze some stocks that Gabelli keeps buying in the last quarters. I use to analyze the stocks, research the overall story (detailed below) and then, do a further research of a specific stock if it is a truly compelling opportunity:

RightNow Technologies (RNOW): RNOW is a leading provider of customer service software delivered over the Internet. It was bought by Oracle ORCL following this company's thesis of playing an active role as a consolidator of the IT industry. The primary motivation for the acquisition appears to be strategic, rather than financial.

The deal will significantly benefit RightNow's shareholders as the price offers 80% premium to the company´s fair value estimate.

Financially speaking, RightNow has more cash than debt, $256 million and $175 million respectively. It has the ability to generate cash flow, something that will enable the firm to repay the debt arising from business expansion initiatives.

RNOW appears overvalued in each of the metrics that the chart analyzes. The green price line, shows that the stock is trading in the higher end of its P/E, P/S and P/B valuation band.

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Chemed Corporation (CHE): CHE operates two wholly owned subsidiaries: VITAS Healthcare Corporation and Roto-Rooter. The former is the nation's largest provider of end-of-life hospice care and the former is the nation's leading provider of plumbing and drain cleaning services.

In terms of figures, the market cap is $959.01 million, the TTM gross margin is at 28.35% and the TTM operating margin is at 11.27%.

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Prominent investors, such as Mario Gabelli, Joel Greenblatt and Ron Baron got very interested in this stock. I am not a fan of the pharma sector (it is very hard to research) but it is quite interesting to see that these kind of investors are interested in the stock.

AnalogicTech (AATI): AATI develops power-management semiconductors for consumer electronic devices such as mobile handsets, notebook computers, smartphones, digital cameras and personal media players.

Earnings per share are expected to grow by 25.0% over the next five years. Net institutional purchases in the current quarter are at 2.9M shares.

Goodrich (GR): GR is one of the world's largest suppliers of components, systems and services to the commercial, regional, business, and general aviation markets. It also produces aircraft and satellite systems for the global military and space markets. The firm includes three business segments: actuation and landing systems, nacelles and interior systems, and electronic systems

Thanks to the recovery from the last economic crisis, Goodrich is also generating better results. Indeed, it is now getting 34% of its sales from commercial plane makers, including 18% from Airbus and 9% from Boeing.

Goodrich is profiting from the demand for model replacements and the growth in the active fleet. It expects that the active fleet will reach 19,685 by 2014.

In terms of future expectations, revenue and earnings are expected to reach $8.1 billion and $5.85 per share respectively.

I like that also John Paulson like GR and initiated a position in the stock last quarter, at an average price of $90. Undoubtly, GR is one of the most interesting industrial stocks to analyze.

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NetLogic Microsystems (NETL): NetLogic Microsystems is a small but growing semiconductor company that designs high-performance processors used in a variety of networking devices to help efficiently move information packets throughout a network.

Broadcom (BRCM) is expected to purchase the company. This deal will be very advantageous for shareholders.

NETL has a dominant position in the market today. However, it is only relied upon by high-end network equipment makers such as Cisco Systems CSCO.

Recently NETL acquired RMI, which is considered a very smart move by the company. RMI is also focused on multi-core processors used in wired and wireless networking equipment.

Financially speaking, the company has performed well. The market cap is 3.44b and MRQ revenue has increased 6.76%. Of course there have been certain headwinds too. For instance, Inventory/current assets ratio has decreased from 13.47% to 11.29%, but the stock has gained 52.68% over the last year.


Rating: 2.5/5 (11 votes)

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