Billionaire investor Mario Gabelli (Trades, Portfolio), leader of New York-based GAMCO Investors, disclosed his first-quarter portfolio last week.
With the goal of generating long-term capital appreciation, the renowned guru and his team use a fundamental, bottom-up approach to look for undervalued stocks that have a strong business and catalysts.
During the three months ended March 31, Gabelli entered 45 new positions, sold out of 47 stocks and added to or trimmed a slew of other investments. Notable trades included a new holding in Webster Financial Corp. (WBS, Financial) following its merger with Sterling Bancorp (STL, Financial), a boost to the Halliburton Co. (HAL, Financial) stake and a reduced bet on Ferro Corp. (FOE, Financial). The IHS Markit Ltd. (INFO, Financial) holding was also dissolved after being acquired by S&P Global Inc. (SPGI, Financial).
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Webster Financial and Sterling Bancorp
Gabelli gained 439,128 shares of Webster Financial (WBS, Financial), allocating 0.22% of the equity portfolio to the position. During the quarter, the stock traded for an average price of $59.45 per share. He previously sold out of the stock in the fourth quarter of 2016.
The transaction occurred as Webster’s merger with Sterling Bancorp (STL, Financial) closed in February. According to the terms of the deal, each share of Sterling common stock was converted into the right to receive 0.4630 of a share of Webster common stock, with Sterling shareholders receiving cash in lieu of fractional shares. Prior to the close of the transaction, Gabelli held 1 million shares of Sterling.
The Stamford, Connecticut-based commercial banking company has an $8.43 billion market cap; its shares were trading around $47.52 on Monday with a price-earnings ratio of 15.27, a price-book ratio of 1.08 and a price-sales ratio of 3.48.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past financial performance and future earnings projections.
The GF Score of 81 out of 100 also indicates the company has good future outperformance potential, having received high marks for momentum, growth and GF Value, a middling rank for profitability and a low grade for financial strength.
Of the gurus invested in Webster Financial, Diamond Hill Capital (Trades, Portfolio) has the largest stake with 1.85% of its outstanding shares. Richard Pzena (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Kahn Brothers (Trades, Portfolio), Bernard Horn (Trades, Portfolio), Hotchkis & Wiley, Ken Heebneer and George Soros (Trades, Portfolio) also have positions in the stock.
Halliburton
With an impact of 0.21% on the equity portfolio, the guru boosted his position in Halliburton (HAL, Financial) by 139.58%, buying 620,416 shares. Shares traded for an average price of $32.29 each during the quarter.
He now holds 1.06 million shares total, which account for 0.36% of the equity portfolio. GuruFocus data shows he has held the stock for over a decade, producing a return of approximately 36.90%
The oilfield services company, which is headquartered in Houston, has a market cap of $34.57 billion; its shares were trading around $38.33 on Monday with a price-earnings ratio of 22.15, a price-book ratio of 4.91 and a price-sales ratio of 2.14.
According to the GF Value Line, the stock is significantly overvalued currently.
The GF Score of 58 out of 100, though, suggests the company has poor future performance potential based on low growth and GF value ranks and moderate profitability, financial strength and momentum ranks.
With a 2.52% stake, Richard Pzena (Trades, Portfolio) is Halliburton’s largest guru shareholder. Other top guru investors include Hotchkis & Wiley, Fisher, Charles Brandes (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Ferro
Impacting the equity portfolio by -0.15%, the investor curbed the Ferro (FOE, Financial) stake by 22.48%, selling 788,057 shares. The stock traded for an average per-share price of $21.74 during the quarter.
Gabelli now holds 2.72 million shares, representing 0.53% of the equity portfolio. GuruFocus data shows he has gained 121.57% on the long-held investment.
The Mayfield Heights, Ohio-based company, which produces specialty materials using organic and inorganic chemistry, has a $1.84 billion market cap; its shares were trading around $22.01 on Monday with a price-earnings ratio of 12.44, a price-book ratio of 3.42 and a price-sales ratio of 1.63.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
The company has poor future performance potential, however, based on the GF Score of 55 out of 100. Ferro raked in moderate ratings for profitability, growth and financial strength as well as a low GF Value rank. It does not have a momentum rank, however, meaning that its full potential cannot be determined currently.
Gabelli is the company’s largest guru shareholder with a 3.24% stake. Jeremy Grantham (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also have positions in Ferro.
IHS Markit and S&P Global
The guru’s investment in IHS Markit (INFO, Financial) was also dissolved after its acquisition deal with S&P Global (SPGI, Financial) closed on Feb. 28. The stock traded for an average price of $116.30 per share during the quarter.
Gabelli’s existing investment in S&P Global was expanded by 161.67% during the quarter as well, bringing the total position to 64,776 shares. He has gained an estimated 52.55% on the investment over its lifetime.
Headquartered in New York, S&P Global, which provides financial information and analytics, has a market cap of $121.96 billion; its shares were trading around $350.52 on Monday with a price-earnings ratio of 25.91, a price-book ratio of 3.06 and a price-sales ratio of 10.38.
The GF Value Line suggests the stock is currently modestly undervalued.
The GF Score of 96 out of 100, however, indicates the company has high outperformance potential, driven by high marks for profitability, growth, GF Value and momentum and a middling rank for financial strength.
Baillie Gifford (Trades, Portfolio) is the company’s largest guru shareholder with a 0.50% stake. Other guru investors include Daniel Loeb (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Cohen, the Parnassus Endeavor Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Simons’ firm and Elfun Trusts (Trades, Portfolio).
Additional trades and portfolio performance
Other new holdings Gabelli established during the quarter included PAR Technology Corp. (PAR, Financial), Gabelli Asset ETF (GAST, Financial), Heartland Media Acquisition Corp. (HMA, Financial), APA Corp. (APA, Financial) and Chase Corp (CCF, Financial).
The guru’s $11.07 billion equity portfolio, which is composed of 898 stocks, is most heavily invested in the industrials sector with a weight of 31.47%, followed by smaller positions in the communication services and consumer cyclical spaces.
According to GuruFocus data, the Gabelli Assset Fund Class AAA returned 18.93% in 2021, underperforming the S&P 500 Index’s return of 28.70%.
