Mario Gabelli is Dumping These 15 Stocks

Published on August 30, 2021 at 4:00 pm by Usman Kabir in Hedge Funds, News

In this article, we discuss the 15 stocks Mario Gabelli is dumping. If you want to skip our detailed analysis of these stocks, go directly to Mario Gabelli is Dumping These 5 Stocks.

Mario Gabelli, a Wall Street veteran who manages more than $11.7 billion in assets through GAMCO Investors, has over the years developed a unique investment strategy for picking small and medium cap companies that are poised to do well in the long term. This form of value investing, through which his hedge fund has beaten the benchmark S&P 500 by a little over 2% since inception in 1986, generally does not attract much interest in the mainstream finance world. However, the success of Gabelli is evident from his personal worth – around $2 billion.

Gabelli recently outlined his thoughts on value investing, telecom stocks – he made his fortune by betting on telecom and media firms three decades ago – and inflation in an interview with finance website Real Vision. Gabelli blasted the pump-and-dump stock schemes on social media, underlined the importance of caution when investing in special purpose acquisition companies, and highlighted the potential that battery technology firms offered. Over the last quarter, some of these thoughts have been reflected in the activity of his portfolio as well.

Some of the top stocks in the investment portfolio of GAMCO Investors at the end of the second quarter of 2021 were The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), among others. However, Gabelli has also trimmed stakes in many companies during this period, selling out 62 stocks and reducing holdings in 403. The market value of the portfolio, however, has increased by about $400 million between March and June this year.

The success of Gabelli has been an exception in the world of finance that is otherwise struggling. 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 July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). 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.

Mario Gabelli is Dumping These 15 Stocks

Mario Gabelli of GAMCO Investors

Our Methodology

With this context in mind, here is our list of the 15 stocks Mario Gabelli is dumping. These were ranked according to the investment portfolio of GAMCO Investors at the end of the second quarter of 2021.

Only the stocks in which the hedge fund trimmed stakes by 40% or more in the second quarter of 2021 were selected for the listing.

The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.

Mario Gabelli is Dumping These Stocks

15. American International Group, Inc. (NYSE: AIG)

Number of Hedge Fund Holders: 39

Percentage Decline in Stake in Q2: 40%

American International Group, Inc. (NYSE: AIG) is a New York-based insurance company. It is placed fifteenth on our list of 15 stocks Mario Gabelli is dumping. According to the latest filings, GAMCO Investors owned 20,115 shares in the company at the end of June worth $957,000.

On August 16, investment advisory Wolfe Research initiated coverage of American International Group, Inc. (NYSE: AIG) stock with an Outperform rating and a price target of $63, noting the healthy competitive conditions in the insurance market.

At the end of the second quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in American International Group, Inc. (NYSE: AIG), up from 33 in the preceding quarter worth $2.4 billion.

Unlike The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), American International Group, Inc. (NYSE: AIG) is one of the stocks Mario Gabelli is dumping.

14. Mattel, Inc. (NASDAQ: MAT)

Number of Hedge Fund Holders: 25

Percentage Decline in Stake in Q2: 41%

Mattel, Inc. (NASDAQ: MAT) is ranked fourteenth on our list of 15 stocks Mario Gabelli is dumping. The firm makes and sells toys for children and operates from California. Regulatory filings show that GAMCO Investors owned 101,900 shares in the firm at the end of the second quarter of 2021 worth more than $2 million.

On July 28, investment advisory JPMorgan maintained an Overweight rating on Mattel, Inc. (NASDAQ: MAT) stock and raised the price target to $28 from $27, appreciating the solid second quarter results posted by the company.

At the end of the second quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $928 million in Mattel, Inc. (NASDAQ: MAT), the same as in the preceding quarter worth $872 million.

In its Q1 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Mattel, Inc. (NASDAQ: MAT) was one of them. Here is what the fund said:

“Mattel (14%, 0.87%), the global toy company, also contributed to the Fund’s positive returns. Fourth quarter sales grew 10%, with Barbie once again leading with an impressive 18% growth, American Girl up 9% due to direct-to-consumer strength, Hot Wheels up 12% and Infant/Toddler growing 7%. Margins also improved to increase EBITDA 53% year-over-year (YoY) during the company’s all-important seasonal peak. CEO Ynon Kreiz’s outlook for 2021-23 includes achievable targets of mid-single-digit revenue growth and continuously improving margins. Mattel’s strategically important IP monetization has also developed well with no fewer than 25 media projects in the works. We expect significant contributions from these high-margin IP revenues over the next several years and do not think the market yet gives the company credit for the scale of this opportunity.”

13. Consolidated Communications Holdings, Inc. (NASDAQ: CNSL)

Number of Hedge Fund Holders: 13

Percentage Decline in Stake in Q2: 44%

Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is placed thirteenth on our list of 15 stocks Mario Gabelli is dumping. The firm provides communications services and operates from Illinois. Securities filings show that GAMCO Investors owned 68,500 shares in the company at the end of June 2021 worth $602,000.

On August 2, investment advisory Citi upgraded Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) stock to Neutral from Sell with a price target of $8, citing the valuation as the key reason behind the upgrade in the ratings.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Anchorage Advisors is a leading shareholder in Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) with 3.8 million shares worth more than $33 million.

Unlike The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is one of the stocks Mario Gabelli is dumping.

In its Q1 2021 investor letter, Bonhoeffer Capital Management, an asset management firm, highlighted a few stocks and Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) was one of them. Here is what the fund said:

“Consolidated Communications (CNSL) provides local telecommunications services to consumers, businesses, and other telecommunications firms in the United States. CNSL provides legacy voice and data services and some fiber-based services to firms and individuals. Currently, CNSL has 780,000 voice subscribers, 76,000 video cable subscribers, and 792,000 data subscribers. In addition, CNSL’s network includes 46,000 fiber miles and has 20,900 on-net buildings.

CNSL is a rollup of local exchange carriers (LECs), some of which have rolled out fiber to their customers. CNSL acquired N. Pittsburgh Telephone (PA) in 2007, SureWest (CA and MO) in 2012, Eventis (MN, IA, WI, ND, and SD) in 2014, and FairPoint (ME, NH, MA, and VT) in 2017. As a result of these acquisitions and paying a high dividend, CNSL accumulated a large amount of debt. The firm is in the first year of a five-year fiber rollout where 1.6 million additional homes will be passed with high-speed internet (HSI) primarily in the Northern New England footprint. Currently, CNSL passed 400,000 homes with highspeed internet. Historically, the HSI penetration rates where fiber has been laid have varied from the high-30% to mid-40% range. In Northern New England (CNSL’s largest service area), most of the connections between and within communities are completed. The remaining connections/equipment are to connect individual residential and commercial customers to the network.

The company’s value proposition is to provide broadband services in suburban and rural markets. This service is provided for $45 to $75 per month depending upon speed. In most markets, CNSL has one competitor (81%) and in about 11% of the markets CNSL is the only provider. In the remainder of the markets, CNSL has two competitors.

CNSL’s last purchase was its largest, FairPoint. FairPoint’s main asset is legacy LEC lines acquired from Verizon Communications in Northern New England. FairPoint’s network was complete, but connections to end users required more network investment. Going into 2020, CNSL had two choices: (1) continue to slowly roll out its fiber to customers, or (2) find external financing to more quickly roll out its fiber to customers. CNSL chose the latter. After a search process, CNSL partnered with Searchlight Capital. Searchlight received 35% of CNSL’s equity and $396 million of preferred stock in return for $425 million of cash to accelerate the fiber rollout. Searchlight will also get a board seat. Searchlight has experience in larger fiber rollouts with some of its current investments.

Other larger incumbent LEC players (like Frontier Communications) are using the slow rollout approach as they are debt constrained. This approach results in continued revenue declines and a much more difficult task of converting existing broadband customers to their service. The CNSL thesis is a bet on a fully funded, quicker network rollout to reinvigorate CNSL’s organic growth. Other changes include hiring the former head of Google Fiber’s southeast region to lead the Northern New England rollout. Google Fiber has great customer service, as evidenced by the highest net promoter score (NPS) in an industry with poor NPSs overall. Management’s incentives have also changed in 2021 to include the fiber rollout metrics and other operational metrics like NPSs, in addition to revenue and operating profit growth.

Consolidation and Fiber-optic Rollout

The US rural and suburban telecommunications services market is a local, fragmented market. Consolidation has occurred over the past ten years amongst these local players and the next generation of technology (fiber-optic connections) is being rolled out. Fiber-optic rollouts are generating… [read the rest of the letter here]

12. Biglari Holdings Inc. (NYSE: BH)

Number of Hedge Fund Holders: 8

Percentage Decline in Stake in Q2: 45%

Biglari Holdings Inc. (NYSE: BH) is a Texas-based company that operates franchise restaurants. It is ranked twelfth on our list of 15 stocks Mario Gabelli is dumping. Mandatory filings show that GAMCO Investors owned 6,000 shares in the company at the end of the second quarter of 2021 worth $957,000.

Biglari Holdings Inc. (NYSE: BH) has a market cap of over $547 million and posted $433 million in revenue last year. In earnings results for the first quarter of 2021, posted on May 7, the firm reported net earnings of $0.07 million.

Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Biglari Holdings Inc. (NYSE: BH) with 16,291 shares worth more than $2.5 million.

In its Q1 2021 investor letter, Canterbury Tollgate, an asset management firm, highlighted a few stocks and Biglari Holdings Inc. (NYSE: BH) was one of them. Here is what the fund said:

“One of our top ten positions, Biglari Holdings (ticker: BH), has garnered some attention and questions due to the chairman, Sardar Biglari. We began buying Biglari Holdings last year when the stock price was trading for a good bit less than tangible book value. Currently our average price per share is in the $80s. Biglari Holdings owns Steak ‘n Shake as well as insurance and oil/gas companies. A few years ago, in the midst of a takeover battle, Mr. Biglari took actions to solidify his control which included transferring cash from the company to a fund controlled by Biglari Holdings in order to turn around and buy BH stock. This was during a difficult period for Steak ‘n Shake. An already depressed stock price sunk more. Sufficive to say, without going into the entire backstory, many value investors are not big fans. I sympathize with their plight though I came to a different interpretation about the course of events—events which led to the depressed price. I started looking at the company a few years ago. Eventually I concluded it would have been less than ideal for Sardar to have taken less bold actions (i.e., to have given up control). Here’s a guy whose fought his entire life to get where he is. With all his quirks, he turned Steak ‘n Shake around after the 2008 crisis and diversified the company into multiple unrelated, less cyclical lines of business. Then, during a

rough patch, he’s faced with a hostile takeover, no doubt being seen as an easy target because of his unpopularity. What might we have expected him to do? Sardar Biglari is not your typical CEO. Born in Iran, he migrated to the U.S. as a refugee during childhood. Compared to the average smooth-talking, diplomatically trained CEO, he’s rough around the edges—a common theme among independent thinking entrepreneurs. He’s not afraid to go against the grain, to upset the apple cart, to be disliked. Biglari has a true owner’s mentality, having only completed a handful of selective deals since taking over post-2008. The value and scarcity of this type of mentality cannot be understated.

In general, my baseline expectation is for a company’s executives to destroy value, particularly when they have little ownership. Seven or eight years ago my wife and I were invited out to a meeting in California put on by a large, well-respected mid-western financial services company. They flew us out, put us up in a nice resort near Santa Barbara, and fed us five-star meals. The firm’s key people were the picture-perfect executive-class—highly diplomatic and respectful, avoiding anything controversial—who I learned had flown in on the company’s private planes. They weren’t shy about how frequently they traveled in style (on the company’s dime). Meanwhile, it wasn’t clear during the conference exactly what was to be accomplished for the benefit of either customers or shareholders. A couple years later a few of these same executives flew down to Nashville on one of the company’s private jets. The purpose was to persuade me to do more business with them. I wondered at the time about the price tag of five executives from a moderately profitable financial services company flying private for an hourlong meeting that could’ve been held by phone.

The firm’s profits were derived mostly from fixed income investments and a loan book. Lower rates persisted for longer than anyone expected, which began to eat away at their bottom line. They bought an emerging market insurance company in an attempt to reinvigorate growth. When that plan faltered, they divested a capital markets division to raise cash when competitors retained or expanded separate business lines. After that they tried a management shake-up. Execs were ousted to no avail. Financial results kept deteriorating even as competitors’ results improved.

I recently received notice that this company was being acquired, no doubt out of necessity. That those luxurious trips and unnecessarily lavish expenses were isolated money-wasting decisions is implausible. The cumulative impact over a decade and a half goes without saying. And to think, all of this for the temporarily comfort of a few executives while destroying value for customers and owners. This is just one of many examples of how a lack of ownership mentality leads to such poor capital allocation and decision making. To be clear, owner-insider’s do not guarantee satisfactory decision making. But it’s terribly difficult to find in their absence.”

11. Ball Corporation (NYSE: BLL)

Number of Hedge Fund Holders: 44

Percentage Decline in Stake in Q2: 47%

Ball Corporation (NYSE: BLL) is a Colorado-based firm that markets packaging products. It is placed eleventh on our list of 15 stocks Mario Gabelli is dumping. 13F filings show that GAMCO Investors owned 3,450 shares in the firm at the end of the second quarter of 2021 worth $280,000.

On August 9, investment advisory Wells Fargo maintained an Equal Weight rating on Ball Corporation (NYSE: BLL) stock but lowered the price target to $92 from $100, noting that global beverage can supply constraints would continue to persist in the near term.

At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Ball Corporation (NYSE: BLL), up from 38 in the preceding quarter worth $1.4 billion.

Unlike The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), Ball Corporation (NYSE: BLL) is one of the stocks Mario Gabelli is dumping.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Ball Corporation (NYSE: BLL) was one of them. Here is what the fund said:

“Aluminum beverage and food container manufacturer Ball Corp, meanwhile, delivered fourth-quarter operating income slightly lower than consensus, though this was mainly attributable to higher startup costs for large new facilities coming online in North America. These investments and additional capacity projects will contribute to strong volume growth globally, however. Aluminum cans are infinitely recyclable and offer the best replacement product for single-use plastic beverage containers, in our view. They are more likely to be recycled than single-use plastic and are more energy efficient in production as well.”

10. Colgate-Palmolive Company (NYSE: CL)

Number of Hedge Fund Holders: 58

Percentage Decline in Stake in Q2: 48%

Colgate-Palmolive Company (NYSE: CL) is ranked tenth on our list of 15 stocks Mario Gabelli is dumping. The company makes and sells a variety of consumer products and operates from New York. According to the latest data, GAMCO Investors owned 6,150 shares in the firm at end of June 2021 worth $500,000.

On August 2, investment advisory Morgan Stanley maintained an Equal Weight rating on Colgate-Palmolive Company (NYSE: CL) stock with a price target of $90, noting that a post-guidance selloff in the stock seemed overdone.

At the end of the second quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $2.36 billion in Colgate-Palmolive Company (NYSE: CL), up from 48 in the previous quarter worth $2.30 million.

In its Q1 2021 investor letter, First Eagle Investment Management, an asset management firm, highlighted a few stocks and Colgate-Palmolive Company (NYSE: CL) was one of them. Here is what the fund said:

“The leading detractors in the quarter (included) Colgate-Palmolive Company. After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”

9. Credit Acceptance Corporation (NASDAQ: CACC)

Number of Hedge Fund Holders: 20

Percentage Decline in Stake in Q2: 50%

Credit Acceptance Corporation (NASDAQ: CACC) is placed ninth on our list of 15 stocks Mario Gabelli is dumping. The company provides financial services and is based in Michigan. Regulatory filings reveal that GAMCO Investors owned 680 shares in the firm at the end of the second quarter of 2021 worth $309,000.

On July 6, investment advisory Credit Suisse maintained an Underperform rating on Credit Acceptance Corporation (NASDAQ: CACC) stock but raised the price target to $330 from $310. Moshe Orenbuch, an analyst at the firm, issued the ratings update.

Out of the hedge funds being tracked by Insider Monkey, California-based investment firm Gobi Capital is a leading shareholder in Credit Acceptance Corporation (NASDAQ: CACC) with 587,803 shares worth more than $266 million.

Unlike The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), Credit Acceptance Corporation (NASDAQ: CACC) is one of the stocks Mario Gabelli is dumping.

In its Q1 2021 investor letter, Curreen Capital, an asset management firm, highlighted a few stocks and Credit Acceptance Corporation (NASDAQ: CACC) was one of them. Here is what the fund said:

“Credit Acceptance is a subprime auto lender, enabling subprime borrowers to buy vehicles from used car dealerships. The business has profitably gained share in a large and difficult market for more than two decades. Management allocates free cash flow to growing the business and repurchasing shares at attractive prices. Credit Acceptance currently trades at an attractive upside-to-downside ratio.”

8. Sabre Corporation (NASDAQ: SABR)

Number of Hedge Fund Holders: 37

Percentage Decline in Stake in Q2: 51%

Sabre Corporation (NASDAQ: SABR) is a Texas-based technology solutions firm for the travel industry. It is ranked eighth on our list of 15 stocks Mario Gabelli is dumping. Latest filings show that GAMCO Investors owned 13,400 shares in the firm at the end of June 2021 worth $167,000.

On May 5, investment advisory Mizuho maintained a Neutral rating on Sabre Corporation (NASDAQ: SABR) stock but lowered the price target to $13 from $15, noting that the firm had posted disappointing first quarter sales growth.

At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $972 million in Sabre Corporation (NASDAQ: SABR), down from 40 in the preceding quarter worth $1.2 billion.

7. Silgan Holdings Inc. (NASDAQ: SLGN)

Number of Hedge Fund Holders: 13

Percentage Decline in Stake in Q2: 58%

Silgan Holdings Inc. (NASDAQ: SLGN) is a Connecticut-based firm that markets packaging products for consumer goods. It is placed seventh on our list of 15 stocks Mario Gabelli is dumping. According to the latest data, GAMCO Investors owned 13,600 shares in the company at the end of June 2021 worth $564,000.

On May 20, investment advisory Longbow initiated coverage of Silgan Holdings Inc. (NASDAQ: SLGN) stock with a Buy rating and a price target of $58, noting that increased at-home trends were benefiting the firm.

At the end of the second quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $236 million in Silgan Holdings Inc. (NASDAQ: SLGN), down from 17 in the preceding quarter worth $246 million.

Unlike The Walt Disney Company (NYSE: DIS), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), and Microsoft Corporation (NASDAQ: MSFT), Silgan Holdings Inc. (NASDAQ: SLGN) is one of the stocks Mario Gabelli is dumping.

6. ConocoPhillips (NYSE: COP)

Number of Hedge Fund Holders: 50

Percentage Decline in Stake in Q2: 58%

ConocoPhillips (NYSE: COP) is placed sixth on our list of 15 stocks Mario Gabelli is dumping. The company is in the oil and gas business and operates from Texas. 13F filings reveal that GAMCO Investors owned 4,800 shares in the company at the end of the second quarter of 2021 worth $292,000.

On July 23, investment advisory Piper Sandler maintained an Overweight rating on ConocoPhillips (NYSE: COP) stock and raised the price target to $80 from $69, noting the second quarter results as unquestionably positive for the energy firm.

Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ConocoPhillips (NYSE: COP) with 5.5 million shares worth more than $340 million.

Here is what ClearBridge Investments has to say about ConocoPhillips (NYSE: COP) in its Q1 2021 investor letter:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) ConocoPhillips. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”

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