Mario Gabelli Stock Portfolio: 10 Best Stocks to Buy

2) Mueller Industries, Inc. (NYSE:MLI)

GAMCO Investors’ Stake Value: $189.3 million

Percentage of GAMCO Investors’ 13F Portfolio: 2.05%

Number of Hedge Fund Holders: 25

Mueller Industries, Inc. (NYSE:MLI) is engaged in making copper, brass, aluminum, and plastic products. It works through 3 business segments: piping systems, industrial metals, and climate. Over the past few years, the company has benefited from higher demand in the construction and industrial sectors.

In 2013, its gross margins were hovering somewhere around 13%. In FY 2023, its gross margins were over ~23%. Therefore, the company has strong and sustainable pricing power on its goods. Over the short to medium term, Mueller Industries, Inc. (NYSE:MLI) is expected to be supported by an expected rebound in construction activity and interest rate cuts. The company’s diversified product line, serving numerous sectors, together with its strong distribution network should continue to act as growth drivers.

Wall Street analysts opine that continued investments in infrastructure and construction might support the company as these sectors are the main drivers of demand for its products. Recently, the company indicated undertaking a $20 million investment at the U.K. tube mill and refinery. This will enable copper tube mills to melt and recycle the scrap. Moreover, the company recently highlighted that its internal investments continue to pay off. It expects these investments to yield even greater benefits as and when market conditions improve.

Its acquisition of Nehring Electrical Works, which was completed during 2Q 2024, gives a substantial platform for expansion in the energy infrastructure space. As per Insider Monkey’s 2Q 2024 database, 25 hedge funds were long Mueller Industries, Inc. (NYSE:MLI).

Diamond Hill Capital, an investment management company, released its third-quarter 2023 investor letter and mentioned Mueller Industries, Inc. (NYSE:MLI). Here is what the fund said:

“We also initiated short positions in Mueller Industries, Inc. (NYSE:MLI), Bank of Hawaii, Alarm.com Holdings and Garmin in Q3. Mueller Industries is a leading producer of copper tubes and pipes for plumbing and HVAC systems — a cyclical industry with largely commoditized products that has seen meaningful margin gains in recent years tied to tailwinds we anticipate will likely reverse in coming years. Further, we expect long-term volume trends will likely remain sluggish as copper piping continues losing share to plastic over time. Given our expectation earnings power will revert to historical levels over time, we initiated a short position during the quarter.”