“I think the real bargains are what they would call the smaller, ignored and unloved companies.”
Mario Gabelli is founder and CEO of Gabelli Asset Management Company Investors, a global investment firm headquartered in Rye, New York. He also serves as portfolio manager, chief investment officer and chairman of The Gabelli Healthcare & Wellness Rx Trust and its fund complex.
Before founding the company he worked for Morgan Group Holding Co. and has been Chief Executive Officer of Greenwich PMV Acquisition Corp since April 2008. He has also been committed to Gamco Investors, Inc.
Here are some of his top holdings:
DIRECTV CL A (DTV): DIRECTV is a provider of digital multichannel television entertainment in the United States and Latin America. It includes two direct-to-home (DTH) segments, DIRECTV U.S. and DIRECTV Latin America. These are engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial subscribers.
DTV is characterized by a strength of its programming lineup. Customers usually include spenders on television services and represent the highest strata of society. In addition, DirecTV has relationships with each of the three largest phone companies in the U.S. (AT&T, Verizon, and Qwest/CenturyLink). These firms provide a great distribution channel.
DIRECTV is a very famous branch within the pay-TV market. Indeed in 2011, it significantly increased the number of subscribers in the U.S. and Latin America. This rise was boosted by new programming package price increases and higher HD and DVR equipment service and lease fees in the U.S.
Growth in Latin America was specifically boosted by the penetration in the Brazilian market.
Now the company expects to launch a new product, Home Media Center. This new device will enable customers to record five shows at a time and will double the storage capacity too. It is widely known that new product lines create new opportunities. And this not be an exception.
In terms of shareholders, DIRECTV has decided to increase shareholder value. The company has engaged in aggressive buyback programs.
Management is confident that the company's full-year EPS will jump to $5.0 in 2013 from $2.3 in 2010 and revenue will reach to $30 billion from $24.1 billion in 2010.
American Express Co. (AXP): American Express Company is primarily engaged in the business of providing travel related services, financial advisory services and international banking services throughout the world.
Despite the economic downturn that has severely affected all the markets, AXP has been able to recover from it. Indeed in the third quarter of 2011, it reported revenues up 9% year over year to $7.57 billion, and profits up 14%, to $1.23 billion, or $1.03 per share.
Most importantly, the number of customers across the world is increasing every day due to the change from cash and checks to electronic payment methods.
Now the company is engaged in cost savings. With such policy, Amex has been able to increase expenses for building future business, such as marketing, promotions and member rewards, without cutting into profitability.
Amex has an interesting program, the Enterprise Growth Group program, that focuses on diversifying revenue in eCommerce, mobile payments and fee-based businesses in emerging markets.
Financially speaking, Amex is strong. It has a sound capital position that it will be able to keep in the years to come. Last but not least, the Federal Reserve approved its CCP in 2011 and the company restarted its buyback program to generate shareholder wealth.
Genuine Parts Co. (GPC): Genuine Parts Co. is a distributor of automotive replacement parts in the U.S., Canada and Mexico.
GPC is a very solid company as it has been generating free cash flow for decades enabling a dividend growth. Most importantly, Genuine Parts is benefited by a return policy from its suppliers, thus reducing the risk of obsolescence.
The company is permanently undertaking initiatives to boost sales and earnings. It has engaged in expansion initiatives, it has tried to expand to new markets and applied cost saving policies. The company relies on a diverse product portfolio for top-line and bottom-line growth.
Genuine Parts has an excellent balance sheet. The company had a low debt/capital ratio of 14.8% as of March 31, 2011. The cash and cash equivalents increased to $465.9 million as of March 31, 2011.
National Fuel Gas Co. (NFG): National Fuel Gas Co. is engaged in the business of owning and holding securities issued by its subsidiary companies. It is a diversified energy company consisting of the following six reportable business segments: utility; pipeline and storage; exploration and production; international; energy marketing; and timber.
The company has recorded years of dividend payments and increases that are appealing for investors. Most importantly, NFG has capacity to develop its pipeline.
Thomas & Betts Corporation (TNB): Thomas & Betts Corporation is a leading manufacturer of connectors and components for worldwide electrical and electronics markets. It operates around the globe and designs, manufactures and sells components used in assembling, maintaining and repairing electrical, electronic and communications systems.
TNB has characterized itself for a steady organic expansion. Furthermore, it has always been conservatively managed. Since 2005 about 40% of cash flow has been used for acquisitions, another 40% for repurchase of stock and debt reduction and almost 20% for capital expenditures.
Financially speaking, the company should maintain a stable balance sheet. In general, TNB generates about $250 to $280 million in annual cash flow.
Forecasts state that earnings should be between $3.20 and $3.35 per share. Return on invested capital has a five-year average of 10.5%.