A Look at Billionaire Mario Gabelli’s Favorite Small-Cap Picks

As a value investor, billionaire Mario Gabelli manages a very diversified portfolio through GAMCO Investors, which consists of several hundred positions. Overall, GAMCO’s 13F portfolio is spread across all sectors, with consumer discretionary and industrials amassing the largest pieces of it. However, in this article we will focus on Gabelli’s favorite small-cap picks, identifying five companies from GAMCO’s latest 13F filing. Namely, we are going to talk about Ryman Hospitality Properties Inc (NYSE:RHP), Chemtura Corp (NYSE:CHMT), GATX Corporation (NYSE:GMT), Crane Co. (NYSE:CR), and Kaman Corporation (NYSE:KAMN).

GAMCO Investors is one of the some 730 funds whose best small-cap ideas we identify each quarter as part of our investment strategy. Through empirical studies, we determined that the best approach to beat the market through imitating smart money investors is to follow the small-caps that they are collectively bullish on. Our strategy involves imitating a portfolio of the 15 most popular stocks among these funds and it has returned 102% since August 2012, beating the market by around 53 percentage points (see more details here).

Ryman Hospitality Properties Inc (NYSE:RHP) represented GAMCO’s third-largest holding at the end of September, the fund holding 4.78 million shares worth $235.14 million, down by 5% on the quarter. As a Real Estate Investment Trust, Ryman Hospitality Properties Inc (NYSE:RHP)’s stock is sporting a solid dividend yield of 4.52% and is trading at 7.7-times book value. The stock has gained around 7% since the beginning of the year. Gabelli also has exposure to Ryman Hospitality Properties Inc (NYSE:RHP) through his Gabelli Funds entity, owning 1.28 million shares. Another shareholder of Ryman is Bernard Selz’s Selz Capital, which owns 257,400 shares as of the end of September.

In Chemtura Corp (NYSE:CHMT), GAMCO owns 5.43 million shares valued at $155.42 million. Chemtura Corp (NYSE:CHMT) is a $2.13 billion producer of chemicals, whose stock has advanced by over 29% since the beginning of the year, as the company has managed to beat earnings estimates for the past several quarters. Trading at around 3.3-times earnings, the stock still looks very cheap compared to both the S&P 500 and the industry medians. Among the funds that we track, a total of 25 held shares of Chemtura Corp (NYSE:CHMT), equal to 23% of the company’s float at the end of June.

Gabelli’s top small-cap picks make a big impression on the second page.

GATX Corporation (NYSE:GMT) comes next in the list of GAMCO’s top small-cap picks, as the fund reported holding 3.17 million shares of the stock worth $140.10 million. GATX Corporation (NYSE:GMT) is a rail car lessor and its stock has lost 18% since the beginning of the year, as the demand for rail car transportation has declined amid lower oil prices. However, analysts are still bullish on the stock, setting an average price target of $55.00 on it, which represents an upside potential of around 17%. Moreover, the stock trades at around 10-times earnings and sports a dividend yield of 3.23%. Charles Paquelet‘s Skylands Capital is another fund bullish on GATX Corporation (NYSE:GMT), holding 397,600 shares as of September 30.

In the manufacturer of industrial products, Crane Co. (NYSE:CR), GAMCO owns some 2.93 million shares valued at $136.40 million. In its most recent financial results, Crane reported EPS of $1.03, slightly missing the estimates of $1.06. The stock is down by 10% year-to-date and is trading at around 12.1-times forward earnings. Among the funds that we track, a total of 23 reported holding stakes equal to nearly 11% of Crane Co. (NYSE:CR)’s common stock as of the end of June, up from 21 funds a quarter earlier. Billionaires Steve Cohen, Israel Englander, and Jim Simons ranked among Crane Co. (NYSE:CR)’s top shareholders in our database at the end of June.

Last but not least, GAMCO reported holding 3.59 million shares of Kaman Corporation (NYSE:KAMN), valued at $128.60 million. Kaman is a $1.08 billion machinery and equipment company that operates in the distribution and aerospace segments. Its stock is flat year-to-date and is trading at a P/E of 15.2, which is below the industry average of 18.2. Moreover, a total of 16 funds in our database held shares of Kaman Corporation (NYSE:KAMN) at the end of June, down from 18 a quarter earlier, while the total value of their holdings was equal to roughly 19.80% of the company’s shares.

Disclosure: None