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Graham Griffin
Graham Griffin
Articles (195) 

Mario Gabelli's Top Trades of the 4th Quarter

Guru slims out multiple holdings

Mario Gabelli (Trades, Portfolio), founder of GAMCO Investors, has revealed his portfolio for the fourth quarter. Major trades include reductions in his Rollins Inc. (NYSE:ROL), Navistar International Corp. (NYSE:NAV) and Quidel Corp. (NASDAQ:QDEL) holdings alongside selling out of GCI Liberty Inc. (NASDAQ:GLIBA). Gabelli also purchased more shares of Liberty Broadband Corp. (NASDAQ:LBRDK).

Gabelli and his New York-based firm seek to generate long-term capital appreciation through their investments. The team searches for opportunities in undervalued stocks that have a catalyst for growth to generate favorable returns.

Portfolio overview

At the end of the fourth quarter, Gabelli's portfolio contained 868 stocks, with 66 new holdings. It was valued at $10.69 billion and has seen a turnover rate of 2%. Top holdings include Herc Holdings Inc. (NYSE:HRI), Sony Corp. (SNE), Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD), GATX Corp. (NYSE:GATX) and Navistar International.

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By weight, the top three sectors represented are industrials (32.45%), communication services (14.56%) and consumer cyclical (11.35%).

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Rollins

During the quarter, Gabelli sold 1.84 million shares of Rollins (NYSE:ROL), continuing on a selling trend since 2010. The sale reduced the holding by 38.58% and the shares traded at an average price of $38.80 during the quarter. Overall, the sale had an impact of -0.49% on the portfolio and GuruFocus estimates the holding has gained 169.17% during its lifetime.

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Rollins is a provider of pest and termite control services. Rollins offers pest control services and protection against termite damage, rodents and insects to homes and businesses, including hotels, food service establishments, food manufacturers, retailers and transportation companies. The company and its wholly-owned subsidiaries offer their services to residential and commercial customers in North America and Australia. In Central America, the Caribbean, the Middle East, Asia, the Mediterranean, Europe, Africa and Mexico, the company operates a franchise system.

On Feb. 8, the stock was trading at $37.21 per share with a market cap of $18.24 billion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.

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GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10, in line with the GF Value Line. There are currently two severe warning signs issued for assets growing faster than revenue and a declining operating margin. Prior to 2019, the company operated with minimal debt and it made a solid reduction in the new debt in 2020.

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GCI Liberty

The guru's GCI Liberty (NASDAQ:GLIBA) holding was cut from the portfolio during the quarter after an eight-year holding period. The remaining 280,360 shares were sold at an average price of $87.36 during the quarter. The sale had an overall impact of -0.26% on the portfolio and GuruFocus estimates the total gain of the holding at 119.16%.

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GCI Liberty is a holding company. Through its subsidiaries, it provides various wireless, data, video, voice and managed services to residential customers, businesses, governmental entities and educational and medical institutions primarily in Alaska under the GCI brand. The company mainly serves markets that bear harsh winters and are located in remote geographies in North America.

As of Feb 8, the stock was trading at $91.73 per share with a market cap of $9.30 billion. There is not enough data for the GF Value Line to be generated, but the Peter Lynch chart shows the stock trading below intrinsic value.

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GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 5 out of 10. There are currently two severe warning signs for declining operating margin percentage and assets growing faster than revenue. The weighted average cost of capital far exceeds the return on invested capital, meaning the companywill destroy value as it grows.

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Liberty Broadband

The guru's largest buy of the quarter came from an addition to his Liberty Broadband (NASDAQ:LBRDK). Gabelli boosted the holding by 73.12% with the purchase of an additional 152,838 shares. The shares traded during the quarter at an average price of $152.25. GuruFocus estimates the total gain of the holding at 62.19% and the purchase had an impact of 0.23% on the portfolio overall.

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Liberty Broadband serves in the telecommunications industry in the United States. It provides cable services to both residential and small to medium-sized businesses through its fiber, hybrid fiber and coaxial cable infrastructure. The reportable segments of the company are Skyhook, which is a wholly owned subsidiary of the company engaged in providing precision location solutions, and Charter, which provides cable services. The firm derives the majority of its revenue from Skyhook.

The stock was trading at $150.03 per share with a market cap of $35.93 billion on Feb. 8. According to the GF Value Line, the stock is trading at a modestly overvalued rating.

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GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 3 out of 10. There is currently one severe warning sign issued for declining revenue per share. 2019 saw cash levels drop compared to a few years prior, leading to the average financial strength score.

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Navistar International

Gabelli sold 425,204 shares of Navistar International (NYSE:NAV) during the quarter to reduce the holding by 12.19%. The shares traded at an average price of $43.59 during the quarter. Overall, the sale had an impact of -0.21% during the quarter and GuruFocus estimates the total gain of the holding at 25.61%.

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Navistar International is a manufacturer of medium and heavy-duty trucks, school buses, military vehicles and diesel engines. The company manufactures Class 4 through 8 trucks and buses in the common carrier, private carrier, government, leasing, construction, energy/petroleum, and student and commercial transportation markets under the International and IC brands. Its geographical segments include the United States, Brazil, Mexico, Canada and others, of which the majority of its revenue comes from the U.S.

On Feb. 8, the stock was trading at $44.12 per share with a market cap of $4.40 billion. The GF Value Line shows the stock trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 2 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 3 out of 10. There are currently five severe warning signs, including new long-term debt and poor financial strength. Revenue decreased over the last few years as net income turned negative for the company.

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Quidel

Gabelli's reduction in Quidel (NASDAQ:QDEL) rounded out his top five trades of the quarter. The guru reduced the holding by 29.44% with the sale of 86,700 shares. The shares were sold throughout the quarter at an average price of $222.20. The sale represented an overall reduction in the portfolio of -0.21% and GuruFocus estimates the total gain of the holding at 453.79%.

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Quidel is engaged in the development, manufacturing and marketing of rapid diagnostic testing solutions. The company generates a majority of its revenue from the rapid immunoassays.

As of Feb. 8, the stock was trading at $232.88 with a market cap of $9.80 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 3 out of 10. There are two severe warning signs issued for assets growing faster than revenue and a Beneish M-Score indicating the company is a possible manipulator. The company saw a major spike in cash flow in 2018 that it carried throughout 2019 despite seeing negative net income in the years prior.

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Disclosure: Author owns no stocks mentioned.

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