Mario Gabelli is the founder, chairman and CEO of Gabelli Asset Management Company Investors (GAMCO Investors). GAMCO Investors is best known for its research-driven, value-oriented equity investing expertise which is based on the principles of Graham & Dodd — that is, investing in undervalued companies that have a high probability of achieving their intrinsic or private value over time.
The following companies represent Gabelli’s stock picks in Barron’s Midyear Roundtable, what he had to say about them and a brief overview of the company.
I keep recommending Viacom which is buying in shares…Looking out three years, you could see $10 a share in earnings. The stock trades for $67, and the company’s private-market value could be $130-$140 a share.
Viacom is an entertainment content company that connects with audiences through content across television, motion picture, online and mobile platforms in more than 160 countries and territories. Viacom operates through two reporting segments: Media Networks and Filmed Entertainment.
Viacom is continually buying back their shares. In 2009, Viacom had 755 million shares; the share count is currently around 487 million, and it will drop to approximately 310 million shares in three to four years.
The stock pays a dividend of $1.20 per share. Net debt is currently around $7.6 billion.
The analysis on Viacom reports:
· Revenue has been in decline for the past year.
· The price is close to a 10-year high of $70.39.
· The P/S ratio is close to a one-year high of 2.77.
· The operating margin is expanding.
Viacom has a market cap of $33.38 billion; its shares were traded at around $68.77 with a P/E ratio of 16.70 and a P/S ratio of 2.70. The company had an annual average earnings growth of 21.9% over the past 5 years.
Jim Simons, Mario Gabelli and Steven Cohen currently hold stake in Viacom. Click here to see these gurus’ holding history of Viacom.
Davide Campari-Milano (MIL:CPR)
It has 576 million shares, and is 51% family-owned…I like its Wild Turkey unit, the bourbon maker. The bourbon market is about $300 billion, and Campari has a 4% market share. Campari could earn €0.33 a share this year, rising to €0.46 in a few more years.
Davide Campari-Milano is a major player in the global beverage sector, with products in over 190 countries around the world and maintaining leading positions in Europe and the Americas. The company is the sixth-largest player worldwide in the premium spirits industry.
Campari bought a Jamaican rum maker in December. Including that deal, the net debt is €928 million. Revenue is expected to reach €1.6 billion this year.
EBITDA will be approximately €360 million, going to €390 next year and possibly over €400 million in three or four years.
The analysis on Campari reports:
- The company has issued €90 million in debt in the past year.
- The per share revenue has slowed in the past year.
- The dividend yield is close to a two-year high
- The P/B ratio is close to a three-year low of 2.08.
Davide Campari-Milano has a market cap of $3.22 billion; its shares were traded at around $5.84 with a P/E ratio of 21.65 and P/S ratio of 2.56. The dividend yield of Campari stocks is 0.96%. The company had an annual average earnings growth of 10.5% over the past 5 years.
Tredegar has 32 million shares, which trade for $25. The company eventually could be sold…The company will earn $1.40 a share in 2013, and as much as $2 in 2015. Tredegar is a great cash generator and global demand for its products is rising.
Tredegar manufactures plastic films and aluminum extrusions through its subsidiaries. The company also makes plastic films for diapers and flat-panel displays.
The company’s net debt is at $80 million with a possibility of $970 million in revenue this year. EBITDA is at approximately $103 million. The company is set to earn approximately $1.40 a share at year-end.
The Peter Lynch Valuation Chart shows that Tredegar appears to be overvalued:
Tredegar Corp. has a market cap of $885.5 million; its shares were traded at around $27.27 with a P/E ratio of 19.50 and a P/S ratio of 0.90. The company had an annual average earnings growth of 5.7% over the past 10 years.
Four gurus hold stake in Tredegar. Click here to see these gurus’ holding histories of the company.
Cablevision Systems (CVC)
I’m revisiting Cablevision Systems. It is facing a lot of head winds, including competition from FiOS, repair of homes damaged by Hurricane Sandy, à la carte pricing, and people cutting the television cord to watch programming on cable… It pays a 60-cent dividend, and at some point the Dolan family, which controls Cablevision, will sell.
Cablevision owns all of the outstanding membership interests in CSC Holdings and its liabilities. CSC Holdings is a cable operator in the U.S. The company also operates cable programming networks, entertainment businesses, telecommunications companies and a newspaper publishing business.
Revenue this year could reach $6.3 billion and EVITDA is approximately $1.6 billion. The net debt is at around $8.4 billion. The shares are also trading at around 7.5 times EBITDA.
The analysis on Cablevision reports:
· The operating margin has been expanding.
· The P/E ratio is at a 10-year high of 122.80.
· The gross margin has been in a long-term decline. The average rate of decline per year is about 1.2%.
Cablevision has a market cap of $3.96 billion; its shares were traded at around $15.34 with a P/E ratio of 128.20 and a P/S ratio of 0.60. The dividend yield for Cablevision stocks is 3.90%. The company had an annual average earnings growth of 5.8% over the past 10 years.
There are currently eight gurus that hold stake in Cablevision. Click here to see the holding histories of these gurus.
Cohen & Steers (CNS)
The stock has dropped to $36 from $44 in the past month or so... It will do $300 million in revenue, $125 million in Ebitda, and maybe $1.70 in earnings per share, up from $1.49…But the company is run by smart guys who will figure out how to respond. If the stock gets hit hard, they can buy back shares. C&S pays a dividend of 80 cents a share.
Cohen & Steers, together with its subsidiaries, manages income-oriented equity portfolios specializing in U.S. and international real estate securities, large cap value stocks, utilities and listed infrastructure, and preferred securities. It also offers alternative investment strategies such as hedged real estate securities portfolios and private real estate multimanager strategies.
The company holds about $176 million in cash. C&S should average $50 billion in assets under management this year. Gabelli thinks that they could end up with close to $12 a share in cash and $3 in earnings by 2016.
The analysis on Cohen & Steers reports:
· The company shows strong financial strength.
· The company has no debt.
· Their operating margin is expanding.
Cohen & Steers has a market cap of $1.65 billion; its shares were traded at around $37.17 with a P/E ratio of 26.30 and a P/S ratio of 5.90. The dividend yield of Cohen & Steers is at 2%. The company had an annual average earnings growth of 27.8% over the past five years.
Swedish Match (OSTO:SWMA)
It has a large share of the Scandinavian market, and is trying to increase its penetration of the U.S… Logically, Swedish Match could be taken over by Philip Morris International. The company is using cash flow to buy back stock and pay dividends.
Swedish Match sells smoke free tobacco, cigars, pipe tobacco and light products worldwide.
In 2010, the company formed a joint venture involving its cigar business with Scandinavian Tobacco Group. Swedish Match also created a joint venture in 2009 with Philip Morris International to market snus outside of Scandinavia.
The analysis on Swedish Match reports:
· The company has shown predictable revenue and earnings growth.
· The operating margin is expanding.
· The dividend yield is close to a 3-year high.
· In the past 3 years, the company has issued kr2.2 billion of debt.
Swedish Match has a market cap of $47.63 billion; its shares were traded at around $246.50 with a P/E ratio of 16.75 and a P/S ratio of 3.98. The company had an annual average earnings growth of 8.8% over the past 10 years. GuruFocus rated Swedish Match the business predictability rank of 4-star.
MS Global Franchise Fund also holds stake in Swedish Match.
Kinnevik (OSTO:KINV A)
I got involved because it owns 38% of Millicom International Cellular, a wireless play in Africa and Latin America that is growing, including by creating an infrastructure for mobile banking in less-developed parts of the world. It is tax-efficient, and some of its venture-capital investments could have big payoffs.
Kinnevik is an investment company. It is a play on digital commerce in Europe through Zalando, an online retailer. It also has telecom investments. The company is divided into three operating areas: Major Listed Holdings, Major Unlisted Holdings and New Ventures.
The analysis on Kinnevik reports:
· The per share revenue has been in decline for the past five years.
· The price is nearing a 5-year high.
· The company has issued kr4.3 billion of debt in the past three years.
· The P/S ratio is close to a 5-year high.
Kinnevik has a market cap of $47.86 billion; its shares traded at around $175.90 with a P/E ratio of 10.76 and a P/S ratio of 26.25. The dividend yield of Kinnevik is 2.59%.
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