Mario Gabelli is the founder, chairman and CEO of GAMCO Investors Inc. This company, set up in New York in 1977, provides investment advice to alternative investments, mutual funds and institutional and high net worth investors. Mr. Gabelli established it when he was an institutional broker-dealer and now the company is listed in the New York Stock Exchange.
Mr. Gabelli graduated from Fordham University and holds an MBA degree from Columbia University Graduate School of Business. He also holds an honorary doctorate from Roger Williams University.
Before GAMCO, Gabelli served at Loeb, Rhoades & Co. There, he started introducing the theory of value investing. He was a follower of Graham's philosophy. He rated companies by cash flow rather than by earnings. He analyzed the firm thoroughly to calculate private-market value, as he called it. He did not pay attention to the actual stock price. He focused on what an investor was willing to pay for it. This approach was broadly used in the '80s during LBOs. These calculations were different from standard measures. Gabelli trademarked the philosophy under the name of The Gabelli Private Market Value with a Catalyst Methodology.
Here are some of his industrial stocks:
Precision Castparts Corp. (PCP, Financial): PCP is a worldwide manufacturer of complex metal components and products and provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and industrial gas turbine applications.
At the end of October of the last fiscal year, earnings dropped due to weak sales and certain comments about sales prospects in key markets such as fasteners and seamless pipe. However, the company holds a credible history of providing investors earnings, margins and free cash flow. Undoubtedly these elements were considered by Mario Gabelli at the time of investing.
Mr. Gabelli likes companies that are consistently good and Precision Castparts is great. PCP has great credentials and has beaten its competitor Boeing in the last ten years. It has reported better book value, higher operating income and better operating income performance. It has been permanently focused on improving margins even when it faced headwinds.
Financially speaking, it has a $24 billion market cap and had a strong performance, returning 18% in 2011.
Crane Co. (CR, Financial): CR is an industrial company that manufactures and distributes products for the construction, aerospace, defense and other industries. Its primary products are industrial pumps, fluid control devices, vending machines, fiberglass panels, aircraft break systems and valves.
In 2010, the company has been able to improve earnings by 22% vis-Ã -vis 2009 and in 2011, they grew other 23%. Accordingly, the stock price increased too. The company's general recovery surpassed the S&P500. Most importantly, shareholders have received an annual rate of return of 48.5% jointly with $9,000 in dividends.
I think Mario Gabelli saw a chance to invest in the company when the company was undervalued. Now he enjoys of a profitable company with ample room for growth. Actually, the company is well priced with a P/E of less than 16 and a dividend yield of 2%. Last but not least, Crane reported a market cap of $2.78 billion. It has a forward P/E of 12.43 and pays a 2.17% dividend yield on a 28.92% payout ratio. The company’s EPS is expected to grow 9.60% in the next five years, and 13.24% in the next year alone. CR has a beta of 1.66 and recently traded at $47.86 a share.
Goodrich (GR, Financial): GR is engaged in the supply of aerospace components, systems and services to the commercial and general aviation airplane markets as well as to the global defense and space markets. Goodrich operates three segments: actuation and landing systems, nacelles & interior and electronic systems. Customers are primarily located in North America, Europe and Asia.
In the second quarter, American Airlines' parent company, AMR Corporation (AMR) reported that fuel costs increased 31% thus creating $524 million in additional expenses. Passenger miles increased jointly with costs pressure earnings; therefore, players like AMR are boosting orders for the creation of fuel-efficient planes.
Why is this related to GR? New planes will include more of its products. Goodrich is benefiting from orders but above all, it is benefiting from the growth in the active fleet too. In 2000, there were 12,822 active planes. In 2010, there were 16,284. And, by 2014, the number is expected to reach 19,685. This doubles the expected fleet growth rate.
There is no doubt why Gabelli picked up this stock. Sales increased from 16.6% to 17.4% and management forecasts that sales will amount to $10 billion in 2014. Regarding its business units, actuation & landing improved its sales by 21% to $737.7 million. Nacelles & interior sales rose 19% and account for $2.4 billion in annual sales. Finally, electronic systems sales grew 8%.
Goodrich is raising its full-year revenue and earnings forecast to $8.1 billion and $5.85-$6 per share. Mr. Gabelli took advantage of the market slide to buy the company.
Flowserve Corporation (FLS, Financial): Flowserve Corporation develops, manufactures and sells precision engineered flow control equipment. The company operates in three segments: FSG Engineered Product Division, FSG Industrial Product Division, and Flow Control Division.
In terms of shares, FLS is trading at $102 each. How is it that the shares have reached the said figure? First, the company is selling near the bottom of its five-year valuation based on P/E, P/B and P/CF and despite growing earnings at 23%, the forward P/E is under 12. Most importantly, although the company is not dependent on the water industry, it is the fast growing part of their business. Finally, the S&P has reported a strong rating on FLS and a price target of $135.
Analysts rated the company as a buy and Mr. Gabelli was interested because it reported TTM gross margin at 36.24% vs. the industry average 32.28%, TTM operating margin at 13.32% vs. industry average at 12.79%, and TTM pre-tax margin at 12.78% vs. industry average at 10.86%. Furthermore, profits stood at $107.8 million, or $1.92 a share, up from $103.9 million, or $1.84 a share, a year earlier. Regarding other results, gross margin was narrowed to 33.6%, bookings rose 16% to $1.16 billion and backlog increased to $2.81 billion from $2.59 billion.
Last but not least, the company agreed to acquire Lawrence Pumps Inc., a maker of critical-service centrifugal pumps used primarily in the petrochemical and oil and gas industries.
AMETEK Inc. (AME, Financial): AME is a global manufacturer of electronic instruments and electromechanical devices with operations in North America, Europe, Asia and South America. The company is divided into two operating groups, namely, the Electronic Instruments Group (EIG) and the Electromechanical Group (EMG).
In the last period, AME closed several acquisitions. At the beginning of 2011, it acquired Coining Holding Company and Avicenna Technology Inc. By the end of the last fiscal year and the beginning of the new one, it acquired Reichert Technologies and Technical Manufacturing Corporation.
Although the company has faced certain problems, it reported a market cap of $7 billion and managed to beat the SPY in terms of return, gaining 8% in 2011. Mr. Gabelli decided to invest in the company, because although it plunged, it has reported TTM operating cash flow/capital expenditures at 9.81 and an increase of MRQ Net Profit Margin to 12.41% from 11.38% year-over-year. In addition, sales/assets increased to 0.1826 from 0.1812.
Mr. Gabelli graduated from Fordham University and holds an MBA degree from Columbia University Graduate School of Business. He also holds an honorary doctorate from Roger Williams University.
Before GAMCO, Gabelli served at Loeb, Rhoades & Co. There, he started introducing the theory of value investing. He was a follower of Graham's philosophy. He rated companies by cash flow rather than by earnings. He analyzed the firm thoroughly to calculate private-market value, as he called it. He did not pay attention to the actual stock price. He focused on what an investor was willing to pay for it. This approach was broadly used in the '80s during LBOs. These calculations were different from standard measures. Gabelli trademarked the philosophy under the name of The Gabelli Private Market Value with a Catalyst Methodology.
Here are some of his industrial stocks:
Precision Castparts Corp. (PCP, Financial): PCP is a worldwide manufacturer of complex metal components and products and provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and industrial gas turbine applications.
At the end of October of the last fiscal year, earnings dropped due to weak sales and certain comments about sales prospects in key markets such as fasteners and seamless pipe. However, the company holds a credible history of providing investors earnings, margins and free cash flow. Undoubtedly these elements were considered by Mario Gabelli at the time of investing.
Mr. Gabelli likes companies that are consistently good and Precision Castparts is great. PCP has great credentials and has beaten its competitor Boeing in the last ten years. It has reported better book value, higher operating income and better operating income performance. It has been permanently focused on improving margins even when it faced headwinds.
Financially speaking, it has a $24 billion market cap and had a strong performance, returning 18% in 2011.
Crane Co. (CR, Financial): CR is an industrial company that manufactures and distributes products for the construction, aerospace, defense and other industries. Its primary products are industrial pumps, fluid control devices, vending machines, fiberglass panels, aircraft break systems and valves.
In 2010, the company has been able to improve earnings by 22% vis-Ã -vis 2009 and in 2011, they grew other 23%. Accordingly, the stock price increased too. The company's general recovery surpassed the S&P500. Most importantly, shareholders have received an annual rate of return of 48.5% jointly with $9,000 in dividends.
I think Mario Gabelli saw a chance to invest in the company when the company was undervalued. Now he enjoys of a profitable company with ample room for growth. Actually, the company is well priced with a P/E of less than 16 and a dividend yield of 2%. Last but not least, Crane reported a market cap of $2.78 billion. It has a forward P/E of 12.43 and pays a 2.17% dividend yield on a 28.92% payout ratio. The company’s EPS is expected to grow 9.60% in the next five years, and 13.24% in the next year alone. CR has a beta of 1.66 and recently traded at $47.86 a share.
Goodrich (GR, Financial): GR is engaged in the supply of aerospace components, systems and services to the commercial and general aviation airplane markets as well as to the global defense and space markets. Goodrich operates three segments: actuation and landing systems, nacelles & interior and electronic systems. Customers are primarily located in North America, Europe and Asia.
In the second quarter, American Airlines' parent company, AMR Corporation (AMR) reported that fuel costs increased 31% thus creating $524 million in additional expenses. Passenger miles increased jointly with costs pressure earnings; therefore, players like AMR are boosting orders for the creation of fuel-efficient planes.
Why is this related to GR? New planes will include more of its products. Goodrich is benefiting from orders but above all, it is benefiting from the growth in the active fleet too. In 2000, there were 12,822 active planes. In 2010, there were 16,284. And, by 2014, the number is expected to reach 19,685. This doubles the expected fleet growth rate.
There is no doubt why Gabelli picked up this stock. Sales increased from 16.6% to 17.4% and management forecasts that sales will amount to $10 billion in 2014. Regarding its business units, actuation & landing improved its sales by 21% to $737.7 million. Nacelles & interior sales rose 19% and account for $2.4 billion in annual sales. Finally, electronic systems sales grew 8%.
Goodrich is raising its full-year revenue and earnings forecast to $8.1 billion and $5.85-$6 per share. Mr. Gabelli took advantage of the market slide to buy the company.
Flowserve Corporation (FLS, Financial): Flowserve Corporation develops, manufactures and sells precision engineered flow control equipment. The company operates in three segments: FSG Engineered Product Division, FSG Industrial Product Division, and Flow Control Division.
In terms of shares, FLS is trading at $102 each. How is it that the shares have reached the said figure? First, the company is selling near the bottom of its five-year valuation based on P/E, P/B and P/CF and despite growing earnings at 23%, the forward P/E is under 12. Most importantly, although the company is not dependent on the water industry, it is the fast growing part of their business. Finally, the S&P has reported a strong rating on FLS and a price target of $135.
Analysts rated the company as a buy and Mr. Gabelli was interested because it reported TTM gross margin at 36.24% vs. the industry average 32.28%, TTM operating margin at 13.32% vs. industry average at 12.79%, and TTM pre-tax margin at 12.78% vs. industry average at 10.86%. Furthermore, profits stood at $107.8 million, or $1.92 a share, up from $103.9 million, or $1.84 a share, a year earlier. Regarding other results, gross margin was narrowed to 33.6%, bookings rose 16% to $1.16 billion and backlog increased to $2.81 billion from $2.59 billion.
Last but not least, the company agreed to acquire Lawrence Pumps Inc., a maker of critical-service centrifugal pumps used primarily in the petrochemical and oil and gas industries.
AMETEK Inc. (AME, Financial): AME is a global manufacturer of electronic instruments and electromechanical devices with operations in North America, Europe, Asia and South America. The company is divided into two operating groups, namely, the Electronic Instruments Group (EIG) and the Electromechanical Group (EMG).
In the last period, AME closed several acquisitions. At the beginning of 2011, it acquired Coining Holding Company and Avicenna Technology Inc. By the end of the last fiscal year and the beginning of the new one, it acquired Reichert Technologies and Technical Manufacturing Corporation.
Although the company has faced certain problems, it reported a market cap of $7 billion and managed to beat the SPY in terms of return, gaining 8% in 2011. Mr. Gabelli decided to invest in the company, because although it plunged, it has reported TTM operating cash flow/capital expenditures at 9.81 and an increase of MRQ Net Profit Margin to 12.41% from 11.38% year-over-year. In addition, sales/assets increased to 0.1826 from 0.1812.
