Billionaire Mario Gabelli’s Top Media and Entertainment Stock Picks

Billionaire value investor Mario Gabelli has a number of accolades under his belt, including the title of Morningstar’s Fund Manager of the Year in 1997 and the more recent awarding of The Institutional Investor’s Money Manager of the Year honor in 2010. His mutual fund GAMCO Investors currently has a public equity portfolio worth $15.22 billion, with around 29% of these investments being held in the Consumer Discretionary sector. Considering the 8.29% gains of the media industry over the past 12 months and GAMCO’s focus on the sector, let’s dig deeper into the mutual fund’s top media and communications picks, which include DISH Network Corp (NASDAQ:DISH), Time Warner Inc (NYSE:TWX), AMC Networks Inc (NASDAQ:AMCX), Twenty-First Century Fox Inc (NASDAQ:FOXA), and Scripps Networks Interactive, Inc. (NYSE:SNI).

Why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the three-year period beginning from September 2012, returning 102% (read the details here).

#5 Scripps Networks Interactive, Inc. (NYSE:SNI)

Shares held (as of September 30): 1.10 million

Total Value (as of September 30): $54.25 million

Percent of Portfolio (as of September 30): 0.36%

During the September quarter GAMCO shed about 45,000 shares of Scripps Networks Interactive, Inc. (NYSE:SNI). Although down by over 20% over the last year, the stock price of the $7.68 billion developer of lifestyle content has risen by nearly 25% since October. RBC Capital Markets reiterated its ‘Sector Perform’ rating for the company last month and set a price target of $76 on its stock, which posits an upside of about 26% to its current price. However, Goldman Sachs is pessimistic about the company’s future prospects owing to its extensive exposure to advertising. Goldman double-downgraded the company to ‘Sell’ from ‘Buy’ in early October. Mason Hawkins‘ Southeastern Asset Management was the largest stockholder of Scripps Networks Interactive, Inc. (NYSE:SNI) within our database at the end of June, holding about 13.25 million shares.

#4 Twenty-First Century Fox Inc (NASDAQ:FOXA)

Shares held (as of September 30): 3.76 million

Total Value (as of September 30): $101.33 million

Percent of Portfolio (as of September 30): 0.67%

GAMCO trimmed its Twenty-First Century Fox Inc (NASDAQ:FOXA) holding by about 3% during the third quarter. The company today reported its earnings for its first quarter of fiscal year 2016, and the results disappointed the market, leading to shares sliding by over 7% in trading today. Analysts expected Twenty-First Century Fox Inc to post a decline on both its top and bottom lines on a year-over-year basis, owing to increased expenses in the original programming segment as well as the rise in sports contracts, and that was indeed the case. Jeffrey Ubben’s ValueAct Capital held about 44.58 million shares of Twenty-First Century Fox Inc (NASDAQ:FOXA) at the end of the June trimester.

GAMCO’s top media stock picks are in the spotlight on the next page.

#3 AMC Networks Inc (NASDAQ:AMCX)

Shares held (as of September 30): 1.46 million

Total Value (as of September 30): $106.87 million

Percent of Portfolio (as of September 30): 0.70%

About 151,000 shares of AMC Networks Inc (NASDAQ:AMCX) were liquidated by GAMCO during the third trimester. The $5.56 billion operator of programming networks including AMC, BBC America, and Sundance TV has seen its stock price rise by more than 25% over the last year. The performance looks even more impressive when seen against the backdrop of the struggle that the company’s peers are going through as the cord cutting trend continues to reduce pay-TV subscribers. The company’s flagship series, The Walking Dead, has been experiencing flat ratings as compared to last year, but was still renewed for a seventh season. Columbus Circle Investors, which is led by Clifford Fox is another prominent stockholder of AMC Networks Inc (NASDAQ:AMCX) within our database, as it held about 1.18 million shares of the company at the end of June.

#2 Time Warner Inc (NYSE:TWX)

Shares held (as of September 30): 2.41 million

Total Value (as of September 30): $165.48 million

Percent of Portfolio (as of September 30): 1.09%

The fund slashed its exposure to Time Warner Inc (NYSE:TWX) by about 7% during the September quarter. In the past twelve months the $63.26 billion company’s stock has slid by about 1.54%. Time Warner can prove to be a solid long-term investment as certain short-term factors such as exchange-rate headwinds and increased spending on its HBO NOW service are temporarily weighing down the company’s bottom line. OZ Management, which is led by Daniel S. Och, is the largest stockholder of  Time Warner Inc (NYSE:TWX) among the company’s investors that we track. The fund held some 9.49 million shares of Time Warner Inc. at the end of June.

#1 DISH Network Corp (NASDAQ:DISH)

Shares held (as of September 30): 2.91 million

Total Value (as of September 30): $169.87 million

Percent of Portfolio (as of September 30): 1.12%

GAMCO reduced its stake in DISH Network Corp (NASDAQ:DISH) by 4% during the quarter. The fund has held a position in the company since the first quarter of 2008. The previous massive upside potential for the stock when it was in Goldman Sachs’ Conviction Buy list with a price target of $108 has seemingly been lost. Goldman removed DISH from the list and now has a ‘Buy’ rating on the company with a $77 price target offering an upside potential of over 18% at the current trading levels. Boykin Curry‘s Eagle Capital Management held about 12.79 million shares of DISH Network Corp (NASDAQ:DISH) at the end of the June quarter.

Disclosure: None