Mario Gabelli revealed some of his favorite stock picks for 2012 during the Barron's Roundtable.
Gabelli's stock picks were largely centered in the auto industry. He recommended Genuine Parts (GPC, Financial), Navistar (NAV, Financial), and Dana Holding (DAN).
However, his most interesting stock pick was Jim Beam Whiskey (BEAM, Financial).
"Next, I am interested in financial engineering, including spin-offs. Beam (BEAM) has 155 million shares outstanding. The company was called Fortune Brands. It spun off Fortune Brands Home and Security (FBHS, Financial) Oct. 3 and renamed itself Beam, as in Jim Beam bourbon. Beam will do about $2.8 billion in revenue this year and $2-plus in earnings per share. Earnings will rise in the next five years to $3.50 a share. The company has $1.7 billion of net debt, which is coming down. Beam could be taken over.
The alcohol business, on a global basis, was $465 billion last year. The growth rate is 5% or 6% a year. Bourbon is a $5 billion to $6 billion category catered to by companies including Beam, Brown Forman (BF-B). Beam's hottest new product is Skinnygirl cocktails. The company also sells Teachers' Scotch, No. 1 in India and No. 2 in Brazil. It has some interesting vodkas. But the play is that someone will want to buy the bourbon business -- Bacardi, perhaps, or Diageo (DEO, Financial)."
Most investors have been bidding up shares of BEAM in the hopes that Diageo will make an acquisition with a premium of over 25% per share.
However, BEAM is far from a value stock. BEAM currently trades at 26X 2011 earnings of $2.09. The growth rate is not much higher than other consumer stocks such as Nike (NKE) or McDonald's (MCD, Financial). By contrast, Diageo currently trades at a P/E of 18.
However, Diageo is not a slam dunk to acquire BEAM. First of all, Diageo made international acquisitions last year in Turkey and China. The company appears to be most interested in emerging markets rather than the U.S.
Gabelli's other picks were Fortune Brands Home and Security (FBHS), Xylem (XYL, Financial), Internap Network (INAP, Financial), Cincinnati Bell (CBB, Financial), Snyder's Lance (LNCE, Financial), Gaylord Entertainment (GET, Financial).
It should be noted that over the years, Gabelli's stock picks have trailed those of Fred Hickey and Felix Zulauf who generally have the most prescient bullish and bearish calls in the Barron's Roundtable.
Gabelli's stock picks were largely centered in the auto industry. He recommended Genuine Parts (GPC, Financial), Navistar (NAV, Financial), and Dana Holding (DAN).
However, his most interesting stock pick was Jim Beam Whiskey (BEAM, Financial).
"Next, I am interested in financial engineering, including spin-offs. Beam (BEAM) has 155 million shares outstanding. The company was called Fortune Brands. It spun off Fortune Brands Home and Security (FBHS, Financial) Oct. 3 and renamed itself Beam, as in Jim Beam bourbon. Beam will do about $2.8 billion in revenue this year and $2-plus in earnings per share. Earnings will rise in the next five years to $3.50 a share. The company has $1.7 billion of net debt, which is coming down. Beam could be taken over.
The alcohol business, on a global basis, was $465 billion last year. The growth rate is 5% or 6% a year. Bourbon is a $5 billion to $6 billion category catered to by companies including Beam, Brown Forman (BF-B). Beam's hottest new product is Skinnygirl cocktails. The company also sells Teachers' Scotch, No. 1 in India and No. 2 in Brazil. It has some interesting vodkas. But the play is that someone will want to buy the bourbon business -- Bacardi, perhaps, or Diageo (DEO, Financial)."
Most investors have been bidding up shares of BEAM in the hopes that Diageo will make an acquisition with a premium of over 25% per share.
However, BEAM is far from a value stock. BEAM currently trades at 26X 2011 earnings of $2.09. The growth rate is not much higher than other consumer stocks such as Nike (NKE) or McDonald's (MCD, Financial). By contrast, Diageo currently trades at a P/E of 18.
However, Diageo is not a slam dunk to acquire BEAM. First of all, Diageo made international acquisitions last year in Turkey and China. The company appears to be most interested in emerging markets rather than the U.S.
Gabelli's other picks were Fortune Brands Home and Security (FBHS), Xylem (XYL, Financial), Internap Network (INAP, Financial), Cincinnati Bell (CBB, Financial), Snyder's Lance (LNCE, Financial), Gaylord Entertainment (GET, Financial).
It should be noted that over the years, Gabelli's stock picks have trailed those of Fred Hickey and Felix Zulauf who generally have the most prescient bullish and bearish calls in the Barron's Roundtable.
