INVESTMENT SCORECARD
Companies that serve as efficient inflation conduits tended to be among the largest contributors to return in the third quarter. This included waste collection and disposal firms Waste Connections (+10%, 4.3% of net assets as of September 30, 2022%) and Republic Services (+4%, 4.9%), NAPA auto parts retailer Genuine Parts Co. (+13%, 4.3%), and razor and sunscreen provider Edgewell Personal Care (+9%, 1.2%). Like most sports franchises, Atlanta Braves baseball club owner Liberty Braves (+15%, 1.3%; +12%, 0.2%) served as an excellent store of value while speculation has gathered that the company could soon convert from a tracker stock to a stand-alone entity that could eventually be sold. Media companies, including Paramount Global (-20%, 5.0%), Grupo Televisa (-34%, 1.6%), and Comcast (-25%, 1.6%) burdened performance as most deal with the cyclical headwinds of falling advertising and secular challenges of cord-cutting and wireless substitution. Newmont Corp. (-29%, 5.1%), the world’s largest gold miner, was the largest detractor from returns for the quarter. Despite rising inflation, gold prices fell while the cost to produce an ounce increased.
LET’S TALK STOCKS
Crane Holdings Co., (CR, Financial) (3.0% of net assets as of September 30, 2022) (CR – $87.54 – NYSE) based in Stamford, Connecticut, is a diversified manufacturer of highly engineered industrial products comprised of four business segments: Aerospace & Electronics, Process Flow Technologies, Payments & Merchandising Technologies, and Engineered Materials with over 11,000 employees across 34 countries. The company announced in March 2022 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.
Madison Square Garden Sports Co. (MSGS, Financial) (3.3%) (MSGS – $136.66 – NYSE), owner of the New York Knicks basketball team and the New York Rangers hockey team, is one the few ways for the public to access the positive dynamics of sports franchises. The company’s predecessor was originally spun-off from Cablevision in 2010 and subsequently separated its venue and entertainment businesses via Madison Square Garden Entertainment. Although the company was negatively impacted by a shortened season and attendance limitations due to COVID, the value of the teams has been growing along with the global popularity of basketball. The Knicks on-court has also improved, with a core of young players and significant draft capital that should engender additional fan engagement and create incremental pricing power in future years.
Sony Corp. (SONY, Financial) (5.4 %) (SONY – $54.05 – NYSE) is a global conglomerate based in Tokyo, Japan, focusing on direct-to-consumerentertainment products. Sony is the #1 integrated global gaming company with its Sony PlayStation 5 gaming platform and video game development studios. Sony Music Recording commands #2 and Music Publishing #1 global share. Sony Music is capitalizing the growth of streaming. Sony also operates the Sony/Columbia film studio, which is well positioned in the OTT streaming wars as a major supplier of high quality library shows like Seinfeld and Spiderman. Sony is an image sensor leader and its expanding its growth opportunity from the high-end Apple iPhones to automotive image sensors. Sony’s Electronics business remains a globally diversified and defensive cash generator.
Swedish Match AB (OSTO:SWMA, Financial) (5.7%) (SWMA – $9.91/SEK110.00 – Stockholm Stock Exchange) produces tobacco products that includesnus and snuff, chewing tobacco, cigars, and lights. The company has been benefiting from the growth of the smokeless tobacco market in both Scandinavia and the U.S., as public smoking bans and health concerns are driving consumers to seek alternative tobacco products to cigarettes. The company has a tobacco-free nicotine pouch product called ZYN that is growing rapidly in the U.S. as well as around the world. In May, the company announced that its board recommended an all cash offer from Philip Morris International (PM) for SEK 106 per share, creating a global smoke-free champion and accelerating PM’s goal of having over 50% of revenues come from smoke-free products.
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.
