In this article, we discuss 10 tech stock picks of billionaire Mario Gabelli. If you want to skip our detailed analysis of these stocks, go directly to 5 Tech Stock Picks of Billionaire Mario Gabelli.
The rising inflation numbers in the United States and a looming interest rate hike have pushed investors towards value stocks in recent months, breaking a growth bias at the market that had stretched on for years. In this context, the investment strategies of successful value investors like Mario Gabelli of GAMCO Investors are also under the spotlight. Over the past thirty years, Gabelli has managed to build a value-centered portfolio at his fund that has beaten the returns of the benchmark S&P 500 Index by 2 percentage points.
Investors eager to replicate the success of Gabelli are looking at his latest activity in the market to gain more insight into the mind of the billionaire. 13F filings from late 2021 show that the portfolio value of GAMCO Investors at the end of December 2021 was $11.3 billion, a decrease of around $300 million compared to the filings for September 2021. During the fourth quarter of 2021, the fund made new purchases in 63 stocks, additional purchases in 235, sold out of 65, and reduced holdings in 406 stocks.
The top ten holdings of the fund comprise just 15.4% of the portfolio and are concentrated in the industrial and consumer goods sectors. However, Gabelli also owns a number of major technology stocks. Some of the top tech stocks in the portfolio of GAMCO Investors at the end of December 2021 included Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), among others discussed in detail below.
Our Methodology
The companies listed below were picked from the investment portfolio of GAMCO Investors at the end of the fourth quarter of 2021. The stocks that operate in the tech sector were preferred for the list.
Data from around 900 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Tech Stock Picks of Billionaire Mario Gabelli
10. Diebold Nixdorf, Incorporated (NYSE:DBD)
Number of Hedge Fund Holders: 14
Diebold Nixdorf, Incorporated (NYSE:DBD) provides connected commerce solutions. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, California-based firm Beach Point Capital Management is a leading shareholder in Diebold Nixdorf, Incorporated (NYSE:DBD), with 4.9 million shares worth more than $44 million.
According to the latest filings, GAMCO Investors owned over 3.9 million shares of Diebold Nixdorf, Incorporated (NYSE:DBD) at the end of the fourth quarter of 2021 worth $35.9 million, representing 0.3% of the portfolio.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Diebold Nixdorf, Incorporated (NYSE:DBD) is one of the stocks that elite investors are buying.
In its Q4 2020 investor letter, Roubaix Capital LLC, an asset management firm, highlighted a few stocks and Diebold Nixdorf, Incorporated (NYSE:DBD) was one of them. Here is what the fund said:
“The largest detractor in the short portfolio during the fourth quarter was Diebold Nixdorf, Incorporated (NYSE:DBD). The company’s primary business is selling automated teller machines to banks. We view the cash ecosystem as a structural share loser and several companies in this ecosystem are on our short focus list. While electronic payments continue to consistently take share, and while there was some concern about using paper money during the health crisis, Diebold Nixdorf, Incorporated (NYSE:DBD) was able to post reasonable results. The stock has carried a low valuation as many stocks do when they have secular pressure. This low valuation allowed the stock to rally alongside the market in Q4 and we exited on our risk discipline. We will continue to monitor this stock and others in this ecosystem for opportunities to re-short when the risk-reward is more favorable.”
9. Rockwell Automation, Inc. (NYSE:ROK)
Number of Hedge Fund Holders: 31
Rockwell Automation, Inc. (NYSE:ROK) provides digital transformation solutions. Latest data shows that GAMCO Investors owned more than 133,000 shares of the company at the end of the fourth quarter of 2021 worth over $46 million, representing 0.39% of the portfolio.
Major hedge funds are bullish on Rockwell Automation, Inc. (NYSE:ROK) stock. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Impax Asset Management is a leading shareholder in Rockwell Automation, Inc. (NYSE:ROK), with 696,642 shares worth more than $243 million.
8. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 94
Adobe Inc. (NASDAQ:ADBE) is a diversified software company. It is one of the top software stocks on Wall Street. At the end of the fourth quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $10.4 billion in Adobe Inc. (NASDAQ:ADBE), compared to 95 in the previous quarter worth $12.6 billion.
Regulatory filings show that GAMCO Investors owned 14,476 shares of Adobe Inc. (NASDAQ:ADBE) at the end of December 2021 worth $8.2 million, representing 0.07% of the portfolio.
Here is what Palm Capital has to say about Adobe Inc. (NASDAQ:ADBE) in its Q1 2021 investor letter:
“Adobe Inc. (NASDAQ:ADBE) has a near-monopoly in content creation software with dominant applications including Photoshop, Lightroom and Illustrator that are critical in the lives of creative professionals. These applications are not only the best in the industry but also have high switching costs as it takes designers many years to become adept at using them. This investment of time is a sunk cost and makes it costly for designers to switch to an alternative. Additionally, as most creative professionals use Adobe’s suite of products it also has a network effect advantage – creative professionals use it because most other creative professionals do.
This creates stickiness of revenue, the visibility of which is enhanced by the fact that more than 90% of Adobe’s overall revenue is subscription-based and a large portion of this is paid in advance.
As Adobe’s programs have already been developed and they are now largely distributing this over the internet, the company’s gross profit margins are a towering 85%.
Adobe Inc. (NASDAQ:ADBE) also has great economics. It is capital light. This means that it does not need physical assets like machinery, property, or stock to operate. As its assets are intangible, it does not need to take on debt to finance them. And its marginal cost of serving additional customers is minimal. The company is highly cash generative, not only because some of its revenue is received upfront, but also because it pays a large portion of salaries with shares and share options. This is evident from its balance sheet – it has had a large net cash position for seven of the past ten years. Furthermore, investments in its intangible assets are expensed rather than capitalized resulting in a low tax burden relative to typical capital-intensive businesses.
Finally, Adobe Inc. (NASDAQ:ADBE) has lots of room for growth. The shift to digital creates a strong underpin for demand growth over the long term. And Adobe’s switching costs give it the power to grow revenue by increasing prices. Additionally, the subscription model is growing Adobe’s market in several ways. Firstly, it makes it affordable for small businesses, opening a new market to Adobe. Secondly, by freeing up IT capex and fixed costs, the model also makes it more affordable for large businesses, incentivizing them to take on pricier options. Thirdly, as the company is not updating its products that were sold under the licence model, the subscription model is beginning to capture many non-compliant users.
Over the next ten years, we expect Adobe’s sales to more than double and its free cash flow margin to expand to almost 40%.
These characteristics make Adobe Inc. (NASDAQ:ADBE) an exceptional business and it is one half of the reason we have been invested for nearly three years.
This example as well as our examples of the aggregators earlier illustrates the impact that the internet has had in not only creating more profitable, less capital-intensive businesses but also in allowing businesses to grow to much larger sizes at a much faster pace than before. It partly explains the pace with which new businesses are reaching $100bn valuations whether on public or private markets.”
7. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 110
PayPal Holdings, Inc. (NASDAQ:PYPL) provides digital payment solutions. Securities filings reveal that GAMCO Investors owned 115,202 shares of the company at the end of December 2021 worth $21.7 million, representing 0.18% of the portfolio.
Hedge funds have been offloading PayPal Holdings, Inc. (NASDAQ:PYPL) stock amid a broader lull around growth stocks. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $9.9 billion in PayPal Holdings, Inc. (NASDAQ:PYPL), compared to 123 in the preceding quarter worth $12.8 billion.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal Holdings, Inc. (NASDAQ:PYPL), which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 110
NVIDIA Corporation (NASDAQ:NVDA) is a visual computing firm. Hedge funds have been piling into the stock in recent weeks. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $10.4 billion in NVIDIA Corporation (NASDAQ:NVDA), compared to 83 the preceding quarter worth $10 billion.
The hedge fund of Mario Gabelli entered the first quarter of 2022 with over 67,000 shares of NVIDIA Corporation (NASDAQ:NVDA) in the portfolio worth more than $19.8 million, representing 0.16% of the portfolio.
Along with Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), NVIDIA Corporation (NASDAQ:NVDA) is one of the stocks that hedge funds have on their radar.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA Corporation (NASDAQ:NVDA) and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA Corporation (NASDAQ:NVDA) closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA Corporation (NASDAQ:NVDA) to the portfolio.”
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Disclosure. None. 10 Tech Stock Picks of Billionaire Mario Gabelli is originally published on Insider Monkey.
