Billionaire Mario Gabelli’s 10 Small-Cap Stock Picks with Huge Upside Potential

6. Flowserve Corp. (NYSE:FLS)

GAMCO Investors’ Stake: $75.93 million

Number of Hedge Fund Holders: 60

Market Capitalization as of May 8: $6.82 billion

Average Upside Potential as of May 8: 22.73%

Flowserve Corp. (NYSE:FLS) designs, manufactures, distributes, and services industrial flow management equipment. It operates in two segments: Flowserve Pump Division and Flow Control Division. It offers custom-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems, replacement parts, and related aftermarket services.

The company’s Flow Control Division/FCD had its bookings surge by 21% year-over-year in Q1 2025 due to double-digit increases in both original equipment and aftermarket activity. FCD also benefited from the strength in the nuclear sector, alongside positive contributions from general industries and energy markets. While FCD’s sales growth of 2% in the quarter was modest, it exceeded expectations.

On March 17, Baird analyst Michael Halloran upgraded Flowserve to Outperform from Neutral with an unchanged price target of $71. Baird believes that the company’s earnings power is attractive, as there is a compelling internally fueled margin expansion story. Flowserve Corp. (NYSE:FLS) anticipates continued margin expansion within FCD, partly due to disciplined pricing & cost management, and the benefits of the company’s 80-20 complexity reduction program.

Artisan Small Cap Fund stated the following regarding Flowserve Corporation (NYSE:FLS) in its Q4 2024 investor letter:

“During the quarter, we initiated new GardenSM positions in VSE, Flowserve Corporation (NYSE:FLS) and Integer Holdings. Flowserve is a leading provider of fluid motion and control products and services. The company designs, manufactures and services a wide range of pumps, valves, seals, automation solutions and related systems for industries that require the management and transfer of fluids. As we highlight in the Stewardship Update section later in this letter, we believe the company is in a good position to benefit from rising natural gas production that is being driven by rising baseload power needs for data centers. And within the oil end market, a loosening of regulatory policies could increase production demands.”