In this article we discuss the 10 best cheap tech stocks to buy according to Mario Gabelli. If you want to skip our detailed analysis of Gabelli‘s history, and hedge fund performance, go directly to the 5 Best Cheap Tech Stocks to Buy According to Mario Gabelli.
Mario Gabelli, the billionaire who heads New York-based GAMCO Investors, is one of the leading value investors in the world, pioneering a growth strategy that focuses on investments in cheap companies that have explosive growth potential. Although most of the holdings of his hedge fund are concentrated in the industrial goods and finance sectors, Gabelli recently disclosed his latest activity on technology-related stocks, a mix of expensive and cheap options, in his 13F filings for the first quarter of 2021.
According to the latest documents, GAMCO Investors owns 23,864 shares in Alphabet Inc. (NASDAQ: GOOG), the parent company of internet search engine Google, worth close to $50 million. This represents 0.43% of the investment portfolio of GAMCO. The filing also reveals that the hedge fund has increased their stake in Alphabet Inc. (NASDAQ: GOOG) by 77% since the end of the last year. Alphabet Inc. (NASDAQ: GOOG) is one of the largest technology companies in the world and posted more than $180 billion in revenue last year.
Another big technology stock on the GAMCO list is Amazon.com, Inc. (NASDAQ: AMZN), the Washington-based ecommerce retailer with stakes in several emerging technology companies. GAMCO Investors owns 5,991 shares in Amazon.com, Inc. (NASDAQ: AMZN) worth over $18.5 million, representing 0.16% of their portfolio. GAMCO activity on Amazon.com, Inc. (NASDAQ: AMZN) stock has increased by 3% since the last regulatory filing at the end of 2020. The retail giant was 169th on the list of holdings of the hedge fund at the end of March 2021.
However, amid increased interest in big tech, GAMCO Investors has trimmed their stakes in Apple Inc. (NASDAQ: AAPL), the California-based technology giant, by 3% over the past few months. The hedge fund run by Gabelli now owns 209,951 shares in Apple Inc. (NASDAQ: AAPL) that are worth $25.6 million, representing 0.22% of their portfolio. Apple Inc. (NASDAQ: AAPL) has hit over $2 trillion in market cap and the share price of the firm is set to jump further in the coming weeks as it prepares to launch new versions of popular products like AirPods.
Despite the presence of these big names on the GAMCO portfolio, the focus of the billionaire remains on cheaper options in the technology industry with significant upside potential. The hedge fund has offered investors more than 55% in returns over the past year through this strategy. Technology-related stocks account for more than 12% of the investment portfolio of GAMCO, highlighting the importance of the sector that is usually not popular among value investors in the market.
It remains to be seen whether the bets Gabelli has made on technology stocks pay off in the long run. Tech stocks have been taking a breather in recent weeks after a record rally through the past twelve months, fundamentally altering market dynamics in certain sectors. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Billionaire Mario Gabelli
With this context in mind, here is our list of the 10 best cheap tech stocks to buy according to Mario Gabelli.
Best Cheap Tech Stocks to Buy According to Mario Gabelli
10. GAN Limited (NASDAQ: GAN)
Number of Hedge Fund Holders: 11
GAN Limited (NASDAQ: GAN) is a California-based technology company founded in 2002. It is ranked tenth on our list of 10 best cheap tech stocks to buy according to Mario Gabelli. GAN stock has returned more than 11.5% to investors over the past week. The company primarily markets internet gambling software to casino operators inside the United States. It also has online betting applications that are used in Italy and the United Kingdom. The flagship offering of the firm is GameSTACK, an enterprise gambling software system.
GAN Limited (NASDAQ: GAN) posted earnings results for the first three months of 2021 on May 17, reporting earnings per share of -$0.11, missing market predictions by $0.09. The revenue over the period was close to $28 million, up 263% year-on-year.
At the end of the first quarter of 2021, 11 hedge funds in the database of Insider Monkey held stakes worth $64 million in GAN Limited (NASDAQ: GAN), down from 22 the preceding quarter worth $77 million.
Just like Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL), GAN Limited (NASDAQ: GAN) is one of the best tech stocks to buy according to Mario Gabelli.
In its Q4 2020 investor letter, Symmetry Invest, an asset management firm, highlighted a few stocks and GAN Limited (NASDAQ: GAN) was one of them. Here is what the fund said:
“We have been following GAN for a long time while it was a small AIM-listed stock. The company had gained a strong market position in New Jersey when the state opened up the market for online casinos in 2014, and also exhibited solid growth and a compelling market position in Italy. But at the same time, it was loss-making, had to constantly raise new capital and the growth was not “overwhelming”. We still spent time familiarizing ourselves with the company, as we could see that their market position in the US could become a strength in due time. The first crucial news came in mid-2018 when the PASPA rule was removed, and all states in the US were free to self-regulate sports betting and casino. This presented itself a clear opportunity for GAN, but as they still did not have a sports betting product, we bided our time. When Pennsylvania, in 2019, also allowed sports betting and casino, and we saw how Fanduel/Betfair started to gain a strong market position building on GAN’s platform, we initiated a purchase. At the time the stock was still only increasing slightly, and the financials were still not good (it takes time for leading KPIs to affect the numbers). We continued to buy in light of willingness from more states to open up, and GAN signing on more and more customers. In May 2020, GAN chose to substitute the small AIM exchange for Nasdaq in the US. As reported revenue began to rise +100% YoY and margins followed, the stock reacted strongly. The stock thus ended up rising 1.000% from mid-2018 to mid-2020. Even during 2019, one could still buy the stock for 3-8 USD (the stock was listed in the UK and in pence at the time). Today it is traded for approximately 20 USD.
GAN is therefore a great example of how you can follow a company for a long time, do your analysis, and be ready to buy in when the business model is facing the crucial inflection point.”
9. Sirius XM Holdings Inc. (NASDAQ: SIRI)
Number of Hedge Fund Holders: 24
Sirius XM Holdings Inc. (NASDAQ: SIRI) is a New York-based company that provides online radio services and satellite radio broadcasting. It was founded in 2008 and is placed ninth on our list of 10 best cheap tech stocks to buy according to Mario Gabelli. Sirius stock has offered investors returns exceeding 7.3% in the past twelve months. The firm operates on a subscription fee basis and offers a range of content, including music, sports, entertainment, comedy, talk, news, traffic, and weather channels, among others.
In quarterly earnings results posted in late April, Sirius XM Holdings Inc. (NASDAQ: SIRI) reported earnings per share of $0.07 for the first three months of 2021, beating market predictions by $0.01. The revenue over the period was over $2 billion.
Out of the hedge funds being tracked by Insider Monkey, Nebraska-based investment firm Berkshire Hathaway is a leading shareholder in Sirius XM Holdings Inc. (NASDAQ: SIRI) with 43 million shares worth more than $265 million.
Just like Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL), Sirius XM Holdings Inc. (NASDAQ: SIRI) is one of the best tech stocks to buy according to Mario Gabelli.
8. International Game Technology PLC (NYSE: IGT)
Number of Hedge Fund Holders: 37
International Game Technology PLC (NYSE: IGT) is a London-based gambling technology company founded in 1990. It is ranked eighth on our list of 10 best cheap tech stocks to buy according to Mario Gabelli. The stock has returned more than 187% to investors over the course of the past twelve months. The firm markets digital gaming products like poker, bingo, and online casino table and slot games, as well as social casino content, remote game servers, and iGaming systems with player account management.
On May 13, International Game Technology PLC (NYSE: IGT) stock was given an Outperform rating by investment advisory Credit Suisse on the back of strong earnings results posted by the firm for the first quarter of 2021. The share price of IGT jumped 6% after the ratings update.
At the end of the first quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $236 million in International Game Technology PLC (NYSE: IGT), up from 25 in the previous quarter worth $230 million.
In its Q3 2020 investor letter, Mittleman Brothers, an asset management firm, highlighted a few stocks and International Game Technology PLC (NYSE: IGT) was one of them. Here is what the fund said:
“International Game Technology (IGT), which rose by 25% on reopening optimism, was the second best performer in Q3. Frustratingly, it just lost all of those gains in late October on resurging COVID-19 cases and renewed lockdowns in Italy (which account for 35% of its sales). IGT does slot machines, casino management systems, lottery games and systems (78% market share in the U.S. state lotteries) and (increasingly) sports betting. Under normal conditions, and once COVID-19 subsides, these businesses generate a substantial and largely recurring stream of free cash flow, much of which was paid out as dividends pre-pandemic.
MIM believes a full recovery will happen much faster than analyst consensus expectations that imply a very low multiple of both EBITDA and FCF for such a high margin, stable and growing group of businesses. The pessimism due to IGT’s Italy exposure is vastly overdone at current valuations. At least some analysts acknowledge the prospect of much higher valuation for IGT, with “bull case” views of fair value in the mid to upper $20s (MIM’s target is $29, more than triple the current price of $8.68). MIM’s $29 price target implies 9x EBITDA and 15x FCF of $400M.
On 14 September 2020 an Australian hedge fund, Caledonia, paid a 47% premium to the market price of $19 to buy Ron Perelman’s controlling stake in Scientific Games (SGMS). SGMS rallied further into the mid-$30s after the news as brokerage firms scrambled to raise their price targets. Scientific Games is IGT’s primary competitor in lotteries, slot machines and sports betting. IGT also has a large controlling shareholder in his late 70s, the Italian Marco Drago of private equity firm de Agostini Spa, which owns about 50% of IGT. Caledonia appears to have paid 9.4x EBITDA at $28 for Perelman’s 35% stake in SGMS ($928M to Perelman).”
7. KAR Auction Services, Inc. (NYSE: KAR)
Number of Hedge Fund Holders: 22
KAR Auction Services, Inc. (NYSE: KAR) is an Indiana-based company that specializes in the provision of online marketing and auction services of used cars. It was founded in 2006 and is placed seventh on our list of 10 best cheap tech stocks to buy according to Mario Gabelli. KAR stock has returned more than 28% to investors over the past three months. The company primarily operates in the United States, Canada, the United Kingdom, and Mexico. The firm also operates 74 whole car auction facilities across North America.
On May 4, KAR Auction Services, Inc. (NYSE: KAR) posted earnings results for the first quarter of 2021, reporting earnings per share of $0.45, beating market predictions by $0.34. The revenue over the period was more than $580 million.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Cardinal Capital is a leading shareholder in KAR Auction Services, Inc. (NYSE: KAR) with 5.8 million shares worth more than $87 million.
Just like Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL), KAR Auction Services, Inc. (NYSE: KAR) is one of the best tech stocks to buy according to Mario Gabelli.
In its Q1 2021 investor letter, Argosy Investors, an asset management firm, highlighted a few stocks and KAR Auction Services, Inc. (NYSE: KAR) was one of them. Here is what the fund said:
“KAR’s primary business is engaged in the auction process between dealers and owners of used vehicles (corporate fleets, auto rental companies, dealers’ trade-in vehicles, etc.). Its other business acts as a floorplan lender (they finance the cars on dealer lots until they are sold) to independent dealers, many of whom are purchasing vehicles from KAR’s auction business. I have owned a small position at around $22 per share since January 2020, right before the pandemic started.
I purchased more after the stock price recently fell into the mid-$14 range. KAR reported disappointing earnings and guidance, but I ultimately believe the company’s strong cash flows make it very cheap. I expect this company to generate about $1.40 per share in free cash flow, and that represents a 10% yield on my recent purchase price for a company that earns returns on capital approaching 20%.
There are headwinds to both businesses, mainly due to exposure to the same phenomenon. People are increasingly purchasing cars online via companies like Carvana or through sophisticated dealers such as CarMax which have their own wholesale auction functions. These companies are increasingly placing pressure on mom-and-pop dealers who cannot keep up with the pace of technological innovation occurring in the industry. While I acknowledge this risk, I do not believe this dynamic will prevent KAR from generating lots of cash flow for investors. This is more squarely in the camp of a value investment, and the “hair” on an investment like this does not prevent it from being a successful investment, though I am less likely to hold onto an investment like this for a lengthy period of time.”
6. The Gabelli Multimedia Trust Inc. (NYSE: GGT)
Number of Hedge Fund Holders: 2
The Gabelli Multimedia Trust Inc. (NYSE: GGT) is a New York-based fund that invests in emerging technologies in industries such as global telecommunications, media, publishing and entertainment. It was founded in 1994 and is ranked sixth on our list of 10 best cheap tech stocks to buy according to Mario Gabelli. The fund aims to achieve capital growth in the long term through the investments in multimedia-related stocks.
The Gabelli Multimedia Trust Inc. (NYSE: GGT) is a solid option for dividend investors as it has a dividend yield of over 8%. GAMCO Investors, the fund managed by Gabelli, holds 901,964 shares in the company worth over $8.6 million, representing 0.07% of their portfolio.
Out of the hedge funds being tracked by Insider Monkey, Texas-based investment firm Brasada Capital Management is a leading shareholder in The Gabelli Multimedia Trust Inc. (NYSE: GGT) with 12,114 shares worth more than $116,000.
Just like Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), and Apple Inc. (NASDAQ: AAPL), The Gabelli Multimedia Trust Inc. (NYSE: GGT) is one of the best tech stocks to buy according to Mario Gabelli.
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Disclosure: None. 10 Best Cheap Tech Stocks to Buy According to Mario Gabelli is originally published on Insider Monkey.
