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Mario Gabelli's Gabelli Asset Fund 1st-Quarter Commentary

Discussion of markets and holdings

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May 24, 2022
Summary
  • The fund returned -3.44% for the quarter.
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INVESTMENT SCORECARD

Deere & Co. (

DE, Financial) (+21%, 3.0% of net assets as of March 31, 2022) shares rose as the company continued to showcase its next generation precision farming technologies amidst a backdrop of increasing commodity prices and a broader lack of dealer inventory within the agricultural machinery ecosystem. Newmont Corporation (NEM, Financial) (1.6%) (+29%), the biggest gold mining company in the world, benefited from a rising gold price and its status as the best-in-class gold miner. Berkshire Hathaway (BRK.B, Financial) (2.1%) (+17%) shares increased as its insurance business benefits from higher interest rates, its rail business benefits from higher energy costs, and the company deployed capital in the form of recent investments in Occidental Petroleum and the acquisition of Alleghany insurance. GATX (GATX, Financial) (1.2%) (+19%) delivered strong performance as the market for leased railcars tightened considerably, lifting spot and renewal leasing rates. GATX and leased railcars are an inflation hedge, with rising steel prices increasing the value of lease fleets and expected strong lease renewal rates. American Express (AXP, Financial) (1.5%) (+15%) provided a strong outlook at its investor day due to investments made during the pandemic, the positive impact to billings from inflation, and the return to a more robust environment for travel and lodging.

Sony (

SONY, Financial) (-19%) (2.3%) declined following the announcement of gaming competitor Activision’s acquisition by Microsoft, followed by the announcement of Sony’s acquisition of video game developer Bungie for $3.6 billion amid uncertainty on Sony’s strategic plan for its Game segment. Xylem (XYL, Financial) (0.7%) (-29%) has been constrained on revenue and profitability due to the shortage in semiconductors, preventing it from meeting delivery commitments, though management continues to actively address supply chain bottlenecks. AMETEK (AME, Financial) (2.8%) (-9%) shares fell amid inflation across a broad range on inputs costs (raw materials, labor, and energy), though the company’s market-leading niche businesses continue to enjoy ample pricing power and continues to execute its M&A strategy as it deployed nearly $2 billion on six acquisitions in 2021. Watts Water Technologies (WTS, Financial) (0.6%) (-28%) has delayed its target of achieving 25% of total company revenue from smart and connected products by one year to 2024, but demand for Watts’s solutions remains robust and the company has a strong balance sheet with $100 million of net cash. ITT (ITT, Financial) (0.7%) (-26%) shares declined as supply challenges in the automotive OEM sector are hampering the recovery in ITT’s light vehicle brake pad business and the Omicron wave of COVID-19 hampered the company’s workforce in December and January. The company won a further 33 new electric vehicle platform awards in 2021, which will drive ITT’s global brake pad market share even higher in coming years.

LET'S TALK STOCKS

Crane Co. (

CR, Financial) (1.1% of net assets as of March 31, 2022) (CR – $108.28 – NYSE), based in Stamford, Connecticut, is a diversified manufacturer of highly engineered industrial products comprised of three business segments: Aerospace & Electronics, Process Flow Technologies, and Payments & Merchandising Technologies with over 11,000 employees across 34 countries. The company recently announced it will separate into two independent companies where the Payment and Merchandising Technologies business will become “Crane NXT” and the Aerospace & Electronics and Process Flow Technologies business retain the Crane Co. name.

Graco Inc. (

GGG, Financial) (0.3%) (GGG – $69.72 – NYSE) is a leading manufacturer of highly engineered fluid handling equipment that measures,mixes, dispenses, and sprays fluids for industrial and construction markets worldwide. The company holds leading market positions and premium pricing for its technologically superior products. Graco has maintained its traditional practice of only raising prices once per year (in January) and thus was negative on price-cost during late 2021 and early 2022. However, the early 2022 enacted price increase was larger than normal and is expected to more than offset cost inflation on a full-year 2022 basis. Further, while the company’s Contractor segment continues to be impacted by electronics shortages, Graco has directed its engineers to re-design products around supply constraints and expects sequential operating improvement throughout the rest of 2022.

Returns represent past performance and do not guarantee future results. 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.

When discussing specific stocks in the portfolios of the Funds, 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 a Fund’s entire portfolio. For the holdings discussed, the percentage of the Fund’s net assets and their share prices stated in U.S. dollar equivalent terms are presented as of March 31, 2022.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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