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Mario Gabelli Reduces Communications Systems

July 18, 2011 | About:
Mario Gabelli is the founder, chairman and CEO of Gabelli Asset Management Company Investors (GAMCO), a firm that manages over $30 billion in global investments. Gabelli is a proponent of the Graham-Dodd school of analysis and uses a bottom-up approach that examines the private market value of a firm. He targets undervalued companies that have a high probability of reaching their intrinsic value over time. He has also successfully made investments by identifying broad macro trends. His Asset Fund has earned a 10-year cumulative return of 87.5%, outperforming the S&P 500, which returned only 16.4% over the same stretch. According to his latest 13D filings, Gabelli reduced his position in Communications Systems Inc. (JCS) by 31.39%.

Holding Histor

Gabelli first bought Communications Systems in the fourth quarter of 2008 when he purchased 460,300 shares for an average price of $8.17. Over the next year he made a couple of subtle moves in his position before selling 177,500 shares in the first quarter of 2010 for an average price of $12.52, making a 53% return on his initial purchase. In his most recent move, he further reduced his holdings by 31.39% for a price of $18.95, netting him an even greater return of 132%. He now owns 184,300 shares in the company.

Communications Systems Inc. (JCS)

Communications Systems manufactures and markets connectors and wiring devices for voice, data and video communications under the "Suttle" brand name in the United States and internationally. The company also manufactures a line of high performance fiber-optic connectors, interconnect devices and fiber cable assemblies for the telecommunications, computer, and electronics markets. The company has several manufacturing plants in the United States and abroad. According to their latest quarterly statements, Communications Systems earned $31 million in revenue, improving year-over-year by 19.8%. Net income also increased to $2.56 million, improving by 92.5% year-over-year. Earnings per share increased from $0.16 last year and $0.23 last quarter to $0.30. Net margin jumped to 8.3%, improving from last year's 5.1% and last quarter's 6.5%. Free cash flow was a loss of $90,000, down from last quarter's gain of $4.15 million but better than last year's loss of $1.66 million. Debt to equity ratio is .187, indicating very low long-term debt numbers and high working capital.

The stock currently trades with a P/E ratio of 14.6, right in line with its historical average, and a P/S ratio of 1.3, currently near a 10-year high. The company book value per share has been increasing steadily over the past five years, currently at 11.04, and its P/B ratio of 1.76 is also at a 10-year high.

Other Headlines

President and CEO William G. Schultz bought 392 shares of JCS stock on 7/8/2011 at the average price of $16.13, bringing his total shares to at least 1,158. CFO David T. Mcgraw also bought 289 shares on 7/8/2011 for the price of $16.13, bringing his total shares to at least 3,485. The price of the stock has since increased by 17.48%.

On 6/28/2011, Communications Systems, Inc. became part of the U.S. broad-market Russell 3000 Index. Russell Indexes rank the 4,000 largest U.S. stocks as of the end of May and automatically include them in their large-cap or small-cap indexes according to objective, market-capitalization rankings, and style attributes.

On 6/23/2011, Transition Networks, a wholly owned subsidiary of Communications Systems Inc. that specializes in switching and conversion technology, announced the release of an 8-port all fiber managed switch.

This is part of GuruFocus Real Time Picks report, which reports the stock trades of Gurus within the last few days. For more information, go to Real Time Picks.

Rating: 4.3/5 (3 votes)


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