Mario Gabelli (Trades, Portfolio), founder of GAMCO Investors Inc. (GBL, Financial), eliminated his positions in four companies during first-quarter 2017: Harman International Industries Inc. (HAR, Financial), Federal-Mogul Holdings Corp. (FDML, Financial), Media General Inc. (MEG, Financial) and Clarcor Inc. (CLC, Financial).
Harman International Industries
Gabelli sold his 851,325-share holding in Harman International at an average price of $111.09, trimming 0.60% of his portfolio. The guru gained 25% on the stock based on GuruFocus estimates.
The audio manufacturing company has a profitability rank of 7, which suggests good growth potential. Harman International has a moderately strong Piotroski F-score of 6, driven by increasing current ratios and gross margins throughout 2016. Additionally, the company’s operating margins and returns on equity are currently near a 10-year high and outperform 71% of competitors.
Despite good financial strength and profitability, Harman’s share price of $111.50 is near a 52-week high and trades roughly 29.2% higher than its median price-sales (P/S) value. The company also has a P/S ratio near a one-year high and a dividend yield near a one-year low.
Federal-Mogul Holdings
The GAMCO Investors CEO axed his stake in Federal-Mogul Holdings, selling 8,154,142 shares at an average price of $9.99. Gabelli trimmed 0.53% of his portfolio with this transaction.
Federal-Mogul Holdings, a supplier of vehicle safety products, exhibits poor financial strength and profitability. Although the company has a Piotroski F-score of 8, Federal-Mogul has weak interest coverage and Altman Z-scores, which imply high bankruptcy risk. Additionally, Federal-Mogul’s Z-scores underperformed the industry median during the past five years.
Federal-Mogul has three severe warning signs, including contracting gross margins and per-share revenue. Based on comparative analysis data, Federal-Mogul is losing competitive power to companies like Gentherm Inc. (THRM, Financial) and Dorman Products Inc. (DORM, Financial).
Activist investor Carl Icahn (Trades, Portfolio) owns over 155 million shares of Federal-Mogul even though the company has poor growth and value potential. (Federal-Mogul is a classic “out-of-favor” company that “nobody else wants.”)
Media General
Gabelli sold his remaining 3,825,450 shares of Media General at an average price of $18.78. The guru knocked off 0.46% of his portfolio with the transaction.
Media General, one of the largest U.S. multimedia companies, exhibits poor financial strength. The company has moderately severe financial distress: its cash-to-debt ratio, interest coverage and Altman Z-score are all in distress zones.
Despite having a profitability rank of 7, Media General has negative ROE and ROA, suggesting low growth potential. The company’s margins and returns underperform over 70% of competitors.
Clarcor
The Gabelli Funds manager sold his 759,353 share stake in Clarcor at an average price of $82.78. Gabelli gained 35% on the stock based on GuruFocus estimates.
Clarcor has a financial strength rank of 7 and profitability rank of 8, both implying a strong business operation. The company also has a GuruFocus business predictability rank of four stars.
Although the company meets Warren Buffett (Trades, Portfolio)’s criteria of a predictable business with competitive advantages, Clarcor is significantly overvalued. The company’s share price, price-earnings (P/E) ratio, P/S ratio and price-book (P/B) ratio are all near 10-year highs. Additionally, Clarcor’s share price is near its 10-year maximum P/S valuation.
See also
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Disclosure: I do not have positions in the stocks mentioned in the article.
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