As a value investor, Mario Gabelli holds a diversified equity portfolio, which hedges his fund, GAMCO Investors, against turmoil in individual sectors or industries. Gabelli has the largest sections of his portfolio devoted to consumer discretionary and industrial stocks, followed by finance and consumer staples’ stocks. The telecom industry also amasses a large chunk of GAMCO’s 13F portfolio and in this article we are going to take a look at Gabelli’s top five telecom picks, which are T-Mobile US Inc (NASDAQ:TMUS), United States Cellular Corp (NYSE:USM), Telephone & Data Systems, Inc. (NYSE:TDS), Cincinnati Bell Inc. (NYSE:CBB), and Rogers Communications Inc. (USA) (NYSE:RCI).
GAMCO is one of over 730 funds whose quarterly 13F filings we track as part of our small-cap strategy. Through extensive research, we determined that the best strategy that involves imitating hedge fund activity is to follow them into their top 15 small-cap ideas. Our strategy has returned 102% since August 2012, and has managed to outperform the S&P 500 ETF (SPY) by some 53 percentage points in that time (see more details).
In T-Mobile US Inc (NASDAQ:TMUS), GAMCO owns 349,050 shares as of September 30, the value of the stake amounting to $13.90 million. The stock is up by 43% year-to-date as the company managed to beat earnings estimates set for it for several quarters in a row, though it reported lower-than-expected earnings of $0.15 per share for the third quarter. T-Mobile trades at 15.7-times forward earnings, almost in line with the S&P 500’s average and during the second quarter, the stock gained more popularity among the funds within our database, as the number of investors with long positions surged to 69 from 50, while the aggregate value of their holdings was equal to 11% of the company’s worth at the end of June. During the third quarter, Clifford Fox’s Columbus Circle Investors added nearly 1.83 million shares to its stake in T-Mobile US Inc (NASDAQ:TMUS), disclosing ownership of 1.85 million shares in its latest 13F filing.
United States Cellular Corp (NYSE:USM) comes next, as GAMCO reported holding 3.25 million shares of the company, worth $115.31 million. During the third quarter, the investor trimmed its stake by 6% amid a 5.9% decline in the stock. United States Cellular Corp recently reported its financial results for the third quarter, which showed EPS of $0.75, significantly surpassing the consensus estimate of a loss of $0.02 per share. On the back of the strong results, Raymond James and FBR & Co. each raised their price targets on the stock, to $50 and $37, respectively, with FBR nonetheless reiterating an ‘Underperform’ rating. Among the funds we track, 15 reported stakes in United States Cellular Corp (NYSE:USM) equal to 5.30% of the company’s outstanding stock as of the end of June.
Three more favored telecom stakes of Mario Gabelli are dialed up on the next page.
In Telephone & Data Systems, Inc. (NYSE:TDS), GAMCO cut its stake by 11% during the third quarter to 3.94 million shares valued at $98.24 million. Telephone & Data Systems turned to a profit in the third quarter, reporting EPS of $0.46, compared with a loss of $1.07 per share posted a year earlier and much higher than the loss of $0.06 per share expected by analysts. The stock trades at around 16.4-times earnings, which is below the Telecom Services industry average of 22.9. Aside from GAMCO, three other funds managed by billionaire investors held shares of Telephone & Data Systems, Inc. (NYSE:TDS) at the end of June, including Jim Simons‘ Renaissance Technologies, which owned 1.88 million shares.
GAMCO also disclosed ownership of 13.89 million shares of regional provider of telecom services, Cincinnati Bell Inc. (NYSE:CBB). The stake was trimmed by 5% during the third quarter and its value stood at $43.35 million at the end of September. Cincinnati Bell’s shares are over 20% in the green year-to-date and sport a forward P/E of 16.3. Among the funds we track, Cincinnati Bell Inc. (NYSE:CBB) is not very popular, as only 11 funds held stakes equal to 11% of the company’s outstanding stock at the end of June.
Rogers Communications Inc. (USA) (NYSE:RCI) ranks as GAMCO’s fifth-favorite telecom holding, the fund owning 809,191 Rogers’ shares worth $27.90 million as of the end of September. Analysts reiterated a neutral outlook on the stock after the release of its most recent financial results, even though the reported figures showed that the company is on a solid turnaround path set by CEO Guy Laurence. The company added 77,000 monthly contract subscribers in the third quarter and reported sales of $3.38 billion and EPS of $0.90, surpassing the estimates on both the top and bottom lines, buoyed in small part by the success of the Canadian cable and telecom company’s baseball franchise, the Toronto Blue Jays. The jump in Rogers Communications’ stock on the back of the results has turned it back into green territory in year-to-date terms and has probably improved the sentiment for it among smart money investors. At the end of June, 14 funds from our database held stakes equal to 0.90% of Rogers Communications Inc. (USA) (NYSE:RCI)’s stock.