GAMCO Investors, a fund run by billionaire Mario Gabelli, is one of more than 700 funds that we track at Insider Monkey. The fund has beaten the S&P 500 by a little over 2% per year since inception in 1986. Mario Gabelli, who was named Morningstar’s Fund Manager of the Year in 1997 and The Institutional Investor’s Money Manager of the Year in 2010, is one of a number of investors who have started with value investing founding fathers Graham and Dodd and added their own twist on that long-standing advice.
Mr. Gabelli’s remarkable biography makes him one of the most interesting investors to follow. The billionaire prefers to hold a very diversified portfolio and he likes to invest in big names and companies that have sizable gross margins. GAMCO Investors’ latest 13F displays a strong focus on the Consumer Discretionary, Industrial and Finance sectors and its extensive holdings are represented by some of the largest and best performing companies from these sectors, such as: DIRECTV (NASDAQ:DTV), Ryman Hospitality Properties Inc (NYSE:RHP), Bank of New York Mellon Corp (NYSE:BK), Legg Mason Inc (NYSE:LM), and American Express Company (NYSE:AXP).
Following activity of investors like Mr. Gabelli can help generate market-beating returns as it has been determined through empirical studies conducted by the founder of Insider Monkey, Dr. Ian Dogan. He determined that 15 most popular small-cap ideas of great investors can beat the market by around 1.0 percentage point per month and generate an annual double-digit alpha. Based on the results of backtests, we launched our small-cap strategy in August 2012 and over the last 2.5 years it managed to return over 130%, outperforming the S&P 500 ETF (SPY) by more than 80 percentage points (read more details here).
Let’s now take a closer look at Mr.Gabelli’s largest holdings as of the end of March, since they are represented by companies that the investor is fond of and have been among his long-term investments. On the first spot is DIRECTV (NASDAQ:DTV) in which GAMCO Investors disclosed a $314.91 million position that contains 3.70 million shares, down by 4% on the quarter. DirecTV is a company is a provider of digital television entertainment in the United States and Latin America. One of the main reasons that Mr. Gabelli owns shares of DirecTV is the upcoming merger with AT&T, which last year made a $48 billion bid to buy DIRECTV (NASDAQ:DTV). However, latest reports suggest that after the merger between Comcast Corporation (NASDAQ:CMCSA) and Time Warner Cable Inc (NYSE:TWC) fell through, the Federal Communications Commission is now watching closer the combination between DirecTV and AT&T. The transaction came into spotlights after Netflix urged the regulators to reject the deal in its current state that could make the merged company the largest Internet service provider. Another large shareholder of DIRECTV (NASDAQ:DTV) is Warren Buffett’s Berkshire Hathaway, which owns 31.35 million shares as of the end of 2014.
Ryman Hospitality Properties Inc (NYSE:RHP) represents Mr. Gabelli’s second-largest equity position with 5.01 million shares valued at $305.23 million. With a market cap of $2.90 billion, Ryman Hospitality Properties Inc (NYSE:RHP) is Mr. Gabelli’s largest bet in the small-cap space. Moreover, Ryman Hospitality Properties Inc (NYSE:RHP) is one of GAMCO’s long-term investments, while its stock appreciated by 67% in the last three years. The company also plans to pay an annual dividend of $2.60 in 2015, which gives it a yield of around 4.80%, one of the highest among hotel Real Estate Investment Trusts. David Shaw and Ken Griffin are two other billionaires with long positions in Ryman Hospitality Properties Inc (NYSE:RHP), according to their latest 13F filings.
In Bank of New York Mellon Corp (NYSE:BK), GAMCO Investors disclosed holding 6.56 million shares, worth $264.10 million. During the first quarter, Mr. Gabelli added around 84,000 shares of the company, which represents the only addition made during this period among GAMCO’s top positions. One of the reasons Mr. Gabelli and other investors are bullish on Bank of New York Mellon Corp (NYSE:BK) is the recent involvement of two activists that try to increase the shareholder value of the company. On one side, there is Richard McGuire of Marcato Capital Management, who considers that Bank of New York Mellon Corp (NYSE:BK) needs a reshuffle of its top management team and a reduction of workforce, among other things. On the other side stands Nelson Peltz of Trian Partners, who considers that the bank needs to spin-off its custody business.
In asset management company Legg Mason Inc (NYSE:LM), GAMCO owns 4.72 million shares, valued at $260.79 million. The stock of the $6.1 billion company had a strong run over the last 52 weeks, gaining 18%, slightly beating the Asset Management industry average of 15.60%. Legg Mason Inc (NYSE:LM) also has Nelson Peltz’s Trian Partners among its top shareholders with 12.89 million shares as of the end of 2014. Billionaires Andreas Halvorsen, Ken Griffin and David Harding also disclosed long positions in the company in their latest 13F filings.
GAMCO’s stake in American Express Company (NYSE:AXP) is the fifth-largest, having a value of $245.20 million and containing 3.14 million shares. The largest shareholder of American Express is Warren Buffett’s Berkshire Hathaway, which owns 151.61 million shares. Despite the stock dropping by more than 16% since the beginning of the year, Mr. Buffett said last week at the Berkshire annual shareholder meeting that he is still likes American Express Company (NYSE:AXP). Moreover, American Express Company (NYSE:AXP) has been recently upgraded by Sanford Bernstein to ‘Outperform’ from ‘Market Perform’, although over the last several months the stock witnessed a series of downgrades, which lowered its consensus rating to ‘Hold’.
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