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Sydnee Gatewood
Sydnee Gatewood
Articles (3500) 

Mario Gabelli's Gabelli Asset Fund 4th-Quarter Shareholder Commentary

Discussion of markets and holdings

INVESTMENT SCORECARD

Sony Corp. (3.0% of net assets as of December 31, 2020, +33%), was the largest contributor to fourth quarter and annual returns as its latest generation PlayStation 5 game console launched with great fanfare, and the company's sensor business stands to benefit from a new smartphone cycle and increased automotive production. Industrial firms such as AMETEK (3%, +22%), Deere & Co. (2%, +22%), CNH Industrial (1%, +64%), and Crane Corp. (1%, +56%) rose in anticipation of renewed economic growth, stemming particularly from rising crop prices and a resumption in aerospace spending. Media companies Walt Disney Company (1%, +46%), ViacomCBS Class A & Class B (1%/0.2%, +26%/+34%), and Discovery (1%/0.3%, +34%/+38%) rose as advertising revenue returns and the companies gain traction with their direct-to-consumer (DTC) efforts. Madison Square Garden Entertainment (1%, +53%). Finally, in late December, long time holding Aerojet Rocketdyne (1%, +32%) agreed to an acquisition by Lockheed Martin for $56 per share in cash.

Several 2020 "winners" gave back a portion of their gains in the fourth quarter as the market favored harder-hit stocks poised for recovery in 2021. Following the decline in the price of gold, miners, including Royal Gold (0.5%, -11%), Newmont (1.4%, -5%), and Barrick Gold (0.2%, -18%) moderated annual gains. S&P Global (1.4%, -9%) declined after announcing the all-stock acquisition of IHS Markit in a deal that should generate significant synergies after closing in mid-2021.

LET'S TALK STOCKS

The following are stock specifics on selected holdings of our Fund. Favorable earnings prospects do not necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop over time. Individual securities mentioned are not necessarily representative of the entire portfolio. For the following holdings, the percentage of net assets and their share prices stated in U.S. dollar equivalent terms are presented as of December 31, 2020.

CNH Industrial NV (1.0% of net assets as of December 31, 2020) (NYSE:CNHI) (CNHI – $12.84 – NYSE), with headquarters in London, England, and Burr Ridge, Illinois, is a global capital equipment manufacturer that was demerged from parent Fiat in 2013. CNHI is unique in that it has leading positions in a variety of global machinery markets. It is best known for its agricultural equipment business, consisting of Case IH, New Holland Agriculture, and Steyr brands. The company's other businesses include IVECO, a leading global truck and bus manufacturer, as well as Case and New Holland construction machinery. Finally, FPT Industrial provides engines and transmissions for the company's captive businesses, and also sells to other machinery manufacturers. The company's new CEO, Scott Wine, formerly of Polaris, is committed to CNHI's financial engineering plan by which it will separate its off highway business from its Truck and Engine business via tax free spin.

Comcast Corp. (1.1%) (NASDAQ:CMCSA) (CMCSA - $55.40 - NYSE), is a broadband and television provider in the U.S., U.K., Italy, and Germany. CMCSA is also a leading media company through its ownership of NBCUniversal. Comcast's broadband business has performed well through the COVID-19 pandemic. The company also launched Peacock, a new streaming service (with ad-supported tiers), in July. The firm is a strong free cash flow generator, and its valuation is attractive at 9x 2021 projected EBITDA.

Herc Holdings Inc. (0.3%) (NYSE:HRI) (HRI – $66.41– NYSE), based in Bonita Springs, Florida, is the third largest equipment rental company in the United States. HRI was spun out of former parent Hertz on June 30, 2016. Underemphasized as part of a significantly larger car rental company, HRI has worked for the past three years to put its operating metrics in line with larger, better known peers such as United Rentals. The company is well positioned to generate considerable cash as the U.S. equipment rental market grows over the next several years. Additionally, management efforts to improve profitability metrics to more closely align with its larger peers could result in valuation multiple expansion.

Newmont Corp. (1.4%) (NYSE:NEM) (NEM - $59.89 - NYSE) is the largest gold mining company in the world by volume, producing approximately 6.5 million ounces in 2020. Newmont aims to maintain production through internal expansion projects as some mines deplete. This capital-light model will allow the company to pay increasingly larger dividends if the price of gold stays at current levels or appreciates.

Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Returns would have been lower had Gabelli Funds, LLC (the "Adviser") not reimbursed certain expenses of the Fund for periods prior to December 31, 1988. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days of purchase. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain information about these and other matters and should be read carefully before investing. To obtain a prospectus, please visit our website at www.gabelli.com. The S&P 500 Index is a market capitalization weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. The Class AAA Share NAVs are used to calculate performance for the period prior to the issuance of Class I Shares on January 11, 2008. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares.


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