We recently published a list of Mario Gabelli Stock Portfolio: 10 Best Stocks to Buy. In this article, we are going to take a look at where AMETEK, Inc. (NYSE:AME) stands against the other Mario Gabelli-approved stocks.
GAMCO Investors, Inc., formerly Gabelli Asset Management Company, is a prominent American firm, which has its headquarters in Rye, New York. The company specializes in offering investment advice and brokerage services to mutual funds, institutional clients, and select investors. The company was founded and is majority-owned by Mario Gabelli, who earned over $750 million in compensation over the past several years.
Veteran investor Mario Gabelli has earned millions of dollars by betting on the unloved. He likes to invest in companies that are NOT being followed or that are NOT being covered by Wall Street analysts. If the companies are not forming part of an index, it makes them even more appealing.
The hedge fund manager remains committed to active value investing. His investment philosophy of focusing on value stocks over growth stocks prevailed even when passive-index funds and Nasdaq “FAANG” dominated the market during the US Fed’s loose interest-rate policies. His investing secret is simple– “Find a good business having good management, buy the stock at a reasonable price, and then hold that stock for the long term.”
As per Insider Monkey’s 2Q 2024 database, out of the total investment portfolio, ~21.7% accounts for Industrial goods.
What Lies Ahead for the US Stock Market as Per Gabelli Funds
Gabelli Funds believes that the US Presidential election is expected to add to market volatility in 2H 2024. At the same time, the much-anticipated rate cuts in September might give a boost to rotation into areas of the market that have lagged during the year. The investment management firm sees increased volatility in the election. That being said, the economic weakness and volatility are expected to be offset by the underlying rotation and lower rates.
Gabelli seems to be optimistic about the broader US economy. He believes that companies have healthy cash flows and that gross margins are better. The only thing that might weigh over the US equities is the geopolitical risk.
Gabelli recently appeared in the prestigious Barron’s Roundtable discussion. He believes that World GDP, which is measured by the International Monetary Fund, is expected to be ~$115 trillion in 2025. The U.S. is 26%, and China is 17%. The consumer makes up for ~70% of the U.S. economy, and industrial spending accounts for ~12%.
Mario Gabelli mentioned that the US Fed is focused on the four R’s. The first is keeping “rates high for longer.” The second R is “continued runoff of the central bank’s balance sheet,” now occurring at a $60 billion pace monthly, down from ~$95 billion in early 2024. Next, the US Fed continues to make efforts to “reduce aggregate demand.” However, the higher government spending continues to offset these efforts. Finally, the Chairman continues to be “rhetoric about bringing the inflation down.”
Mergers and acquisitions (M&As) and other financial engineering strategies are expected to ramp up substantially, for numerous reasons. Gabelli believes that several private equity funds are about to see the end of their 10-year life cycles, and limited partners (LPs) need liquidity. Therefore, this situation will lead to higher sales. Mario Gabelli expects M&A to pick up globally in 2H 2024.
While the S&P 500 is up over ~15% on a YTD basis, the veteran investor believes that stocks can compound at ~8% annual growth rate in the upcoming years, significantly higher than the earnings from fixed-income securities.
Mario Gabelli is Optimistic About These Sectors
Mario Gabelli seems to gain interest in the sports franchises. This is because sports will remain central to linear television and streaming. The buzz is that media companies are shelling out hefty sums for broadcasting and streaming rights.
Moving on, the veteran hedge fund manager believes that artificial intelligence is a great technology, just like other market experts.
Gabelli’s next pick is natural gas. He believes that, over the next few years, there is a huge potential for prices to increase. This is because some producers are capping wells or producing less and demand continues to pick up as compared to power generators and liquefied natural gas exports.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a technician’s hands making precision adjustments to a specialty industrial machine.
AMETEK, Inc. (NYSE:AME)
GAMCO Investors’ Stake Value: $112.3 million
Percentage of GAMCO Investors’ 13F Portfolio: 1.22%
Number of Hedge Fund Holders: 41
AMETEK, Inc. (NYSE:AME) is a diversified industrial conglomerate. It operates via 2 segments: electronic instruments, or EIG, and electromechanical, or EMG.
AMETEK, Inc. (NYSE:AME) plans to increase investments in its business and utilize its strong balance sheet to deploy capital on strategic acquisitions, thereby, positioning it for continued long-term growth. It plans capital deployment for strategic acquisitions, opportunistic buybacks, and increasing dividends.
In 2Q 2024, AMETEK, Inc. (NYSE:AME) saw sales of $1.73 billion, reflecting a rise of 5% from the same period in 2023. The acquisitions added 8 points in the quarter and foreign currency was a marginal headwind. The company’s operational performance in the quarter was healthy, with strong core margin expansion.
Its operating margins came in at 25.8% in 2Q 2024, up 40 basis points from the prior year. Excluding the dilutive impact from acquisitions, its core margins increased ~180 basis points in the quarter. Its diluted EPS is expected to be in the range of $6.70 – $6.80 for the year, exhibiting a rise of 5%-7% from the previous year.
With moderation in inflation, AMETEK, Inc. (NYSE:AME) saw a positive pricing benefit in 2Q 2024, which should help it in 2H 2024. Its defense business should remain robust, and contribute high single-digit growth for FY 2024. The company remains optimistic about the Chinese market and expects this market to pick up shortly. Also, it is implementing some cost-saving measures, while introducing new products for the Paragon business. These initiatives should be earnings accretive in 4Q 2024.
Analysts at Oppenheimer initiated coverage on the shares of AMETEK, Inc. (NYSE:AME), and raised their rating from a “Market Perform” to an “Outperform.” They gave a $200.00 price target on 22nd May.
According to Insider Monkey’s 2Q 2024 data, 41 had held stakes in AMETEK, Inc. (NYSE:AME).
Overall AME ranks 9th on our list of best stocks to buy according to Mario Gabelli. While we acknowledge the potential of AME as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AME but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
