This article presents an overview of the 5 Undervalued Stocks Picked by Billionaire Gabelli. For a detailed overview of such stocks, read our article, 11 Undervalued Stocks Picked by Billionaire Gabelli.
5. CNH Industrial NV (NYSE:CNHI)
Number of Hedge Fund Investors: 29
GAMCO’s Stake: $106M
With a PE ratio of 6.65 and a dividend yield of 3.46%, CNH Industrial NV (NYSE:CNHI) ranks fifth in our list of the top undervalued stocks picked by billionaire Mario Gabelli.
GAMCO owns a stake worth about $106 million in CNH Industrial NV (NYSE:CNHI).
Oakmark Global Select Fund made the following comment about CNH Industrial N.V. (NYSE:CNHI) in its Q3 2023 investor letter:
“CNH Industrial N.V. (NYSE:CNHI) (Italy), which designs, manufactures, and distributes agricultural and construction equipment, was the top detractor for the quarter. CNH Industrial’s share price fell following its second-quarter results, as agriculture equipment sales rose 5% in local currency, a slowdown from the prior quarter. This performance fell below market expectations due to destocking activity in Brazil and some production ramp-up issues for its new Patriot sprayer. We believe the production issues are temporary while the destocking actions will better position the business for the midterm. Pricing power remains quite strong and increased by roughly 7%, and precision agricultural sales grew by 21%. While the market was overly focused on near-term demand and sales growth, the agriculture equipment division produced its highest quarterly margin ever at 16.8%—an encouraging development that supports our view of the company’s long-term profitability. Further, the much smaller construction business delivered strong results, including its own quarterly margin record. Management maintained guidance for the rest of the company’s current fiscal year and indicated it expects to exceed the 2024 targets laid out at a capital markets day in 2022. We recently met with CEO Scott Wine at the company’s offices. He expressed confidence in the company’s ability to drive much better through-cycle financial performance while avoiding the company’s previous mistakes. He also believes the company’s share price is materially undervalued, and although he would prefer to invest in the business, he sees an opportunity to increase returns to shareholders via share repurchases. We believe CNH Industrial remains a solid business in an attractive industry that is run by a much-improved management team.”
4. Textron Inc (NYSE:TXT)
Number of Hedge Fund Investors: 27
GAMCO’s Stake: $132M
Yet another industrial play in billionaire Gabelli’s portfolio, Textron Inc (NYSE:TXT) shares were upgraded in January to Conviction Buy from Buy by Goldman Sachs.
Goldman Sachs thinks Textron Inc (NYSE:TXT) is expected to see growth in its business-jet unit, whose brands include Cessna and Beechcraft.
3. Mueller Industries Inc (NYSE:MLI)
Number of Hedge Fund Investors: 21
GAMCO’s Stake: $150M
Manufacturing company Mueller Industries Inc (NYSE:MLI) ranks third in our list of the undervalued stock picks of Mario Gabelli.
Gabelli’s hedge fund owns a $150 million stake in Mueller Industries Inc (NYSE:MLI).
Mueller posted third quarter results in October. GAAP EPS in the period came in at $1.17. Revenue in the period fell 13.2% year over year to $819.8 million.
Diamond Hill Long-Short Fund made the following comment about Mueller Industries, Inc. (NYSE:MLI) in its Q3 2023 investor letter:
“We also initiated short positions in Mueller Industries, Inc. (NYSE:MLI), Bank of Hawaii, Alarm.com Holdings and Garmin in Q3. Mueller Industries is a leading producer of copper tubes and pipes for plumbing and HVAC systems — a cyclical industry with largely commoditized products that has seen meaningful margin gains in recent years tied to tailwinds we anticipate will likely reverse in coming years. Further, we expect long-term volume trends will likely remain sluggish as copper piping continues losing share to plastic over time. Given our expectation earnings power will revert to historical levels over time, we initiated a short position during the quarter.”
2. GATX Corp (NYSE:GATX)
Number of Hedge Fund Investors: 15
GAMCO’s Stake: $159M
Railcar leasing company GATX Corp (NYSE:GATX) ranks second in our list of the undervalued stocks picked by Mario Gabelli.
As of the end of the third quarter of 2023, the hedge fund had a $159 million stake in GATX Corp (NYSE:GATX).
In October GATX Corp (NYSE:GATX) posted Q3 results. Adjusted EPS in the period came in at $1.44, missing estimates by $0.03. Revenue jumped 12.2% year over year to $360.1 million, surpassing estimates by $16.08 million.
1. Herc Holdings Inc (NYSE:HRI)
Number of Hedge Fund Investors: 28
GAMCO’s Stake: $197M
Herc Holdings Inc (NYSE:HRI) is the biggest holding of GAMCO Investors as of the end of the third quarter. The fund has a $197 million stake in the equipment rental company.
In November, Herc Holdings Inc (NYSE:HRI) announced a new three-year performance target during its investor day event. Herc Holdings Inc (NYSE:HRI) is targeting organic rental revenue of 10% to 14% compound annual growth (CAGR) from 2024 through 2026 and establish an organic adjusted EBITDA CAGR of 11% to 16% over the same period.
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