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Billionaire Mario Gabelli Made Large Moves In Several Merger Arbitrage Plays Going Into 2017

Billionaire Mario Gabelli is among the few value investors on the Street who don’t shy away from speaking their mind or revealing their trade ideas. This transparency reflects in the changes he makes to his portfolio, most of which are in stocks that he has discussed publicly. Mr. Gabelli’s investment management firm GAMCO Investors, which is one the 140 Biggest and Most Famous Activist Hedge Funds, currently manages approximately $40 billion worth of assets.

According to its recently-submitted 13F filing, GAMCO Investors’ 13F portfolio was worth $15.28 billion at the end of 2016 and its top-10 equity holdings accounted for only 13.56% of that value. The filing also revealed that during the fourth quarter of 2016, the firm’s 13F portfolio had a quarterly turnover rate of just 14.34% and that stocks from the industrials and consumer discretionary sectors each amassed over 26% of the portfolio’s value at the end of that period. In this article, we will take a look at the major moves in equities that GAMCO Investors made during the October-December period and will try to uncover the reasoning behind those moves.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see the details here).

Mario Gabelli


– Shares Held By GAMCO Investors (as of December 31): 759,353

– Value of Holding (as of December 31): $62.62 Million

CLARCOR Inc. (NYSE:CLC) is one of the oldest holdings of GAMCO Investors and in the final quarter of 2016 the fund became even more bullish on the company, increasing its stake in it by 32%. The filtration and industrial packaging products provider saw its stock skyrocket in 2016, with the major push coming in December when Parker-Hannifin Corp (NYSE:PH) announced that it will be acquiring the company for $4.3 billion in an all-cash deal. After the 66% rally last year and acquisition offer, CLARCOR Inc. (NYSE:CLC)’s stock has unsurprisingly been range-bound this year and is trading close to its acquisition price of $83, which suggests market participants are extremely optimistic about the deal being closed.

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Brink’s Company (NYSE:BCO)

– Shares Held By GAMCO Investors (as of December 31): 1.58 Million

– Value of Holding (as of December 31): $65.26 Million

Brink’s Company (NYSE:BCO) has also been in GAMCO Investors’ equity portfolio for a long time. However, unlike CLARCOR, the firm perhaps thought of booking some profit in this case, selling 23% of its holding in the logistics and security company during the October-December period. Though Brink’s Company (NYSE:BCO) has appreciated by almost 30% since the end of the fourth quarter, one can’t blame GAMCO Investors for making that decision as the stock had already rallied by over 55% during the second-half of 2016. Most of the gains that the stock has seen this year came recently, after the company declared its fourth quarter results. While analysts were expecting it to report EPS of $0.72 on revenue of $735.34 million, Brink’s Company managed to beat those estimates easily, posting EPS of $0.87 on revenue of $768 million for the quarter.

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Head to the next page for a discussion of three other stocks held by GAMCO Investors on December 31.

Harman International Industries Inc (NYSE:HAR)

– Shares Held By GAMCO Investors (as of December 31): 851,325

– Value of Holding (as of December 31): $94.63 Million

GAMCO Investors made one of its most bullish moves during the fourth quarter in Harman International Industries Inc (NYSE:HAR), upping its holding in the company more than eleven-fold. Like CLARCOR, Harman International Industries Inc (NYSE:HAR) also agreed to be acquired nearing the end of 2016, which sent its shares soaring. In this case, South Korean behemoth Samsung agreed to acquire the auto-focused connected products manufacturer for $112 per share in November, paying a near 40% premium from the $80-levels the stock was trading at prior to the announcement of the deal. According to both companies, the deal is expected to be completed in the middle of 2017. On January 26, Harman International declared a quarterly dividend of $0.35 per share, which was in-line with the previous dividend.

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Mondelez International Inc (NASDAQ:MDLZ)

– Shares Held By GAMCO Investors (as of December 31): 3.17 Million

– Value of Holding (as of December 31): $140.79 Million

Confectionary giant Mondelez International Inc (NASDAQ:MDLZ), which has been trying to undergo a transformation for several quarters now, became even more appealing to GAMCO Investors during the fourth quarter; the fund increased its holding in the company by 19% during that time. While Mondelez International Inc (NASDAQ:MDLZ)’s stock is currently trading close to its lifetime high, it has mostly been range-bound since the second-half of 2015. For its most recent quarter, the company failed to beat analysts’ EPS and revenue estimates. However, it provided some relief to shareholders by reaffirming its 2017 guidance and 2018 margin targets. Some analysts think that if one takes into account Mondelez’s present and projected financials, the stock would be a bargain at levels around $40 due to the forward yield it sports, which presently stands at 1.75%.

Chemtura Corp (NYSE:CHMT)

– Shares Held By GAMCO Investors (as of December 31): 4.57 Million

– Value of Holding (as of December 31): $151.87 Million

Chemtura Corp (NYSE:CHMT) is another merger arbitrage play that GAMCO Investors held at the end of 2016. However, unlike the other two stocks we discussed previously, in this case GAMCO Investors chose to lower its holding in the company, by 15%. The announcement that Chemtura Corp (NYSE:CHMT) will be acquired was made near the end of the third quarter of 2016 and after the initial spike its stock has been hovering close to the $33 level. Chemtura will be acquired by German-based specialty chemical company Lanxess for approximately $2.5 billion in an all-cash deal. At the time of the announcement, Laxness said that the deal will help it expand its business activities in additives for lubricants and flame retardants.

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Disclosure: None

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