In this article, we discuss the 5 stocks that Mario Gabelli was right about. If you want to read about some more stocks that Mario Gabelli was right about, click Mario Gabelli Was Right About These 3 Stocks.
Value investors like Mario Gabelli of GAMCO Investors have come under increased spotlight in recent months as rising inflation and interest rates push the market away from growth offerings. Even though Gabelli owns prominent growth names like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), his claim to fame lies in his value investing prowess. In the past three decades, his fund has beaten returns of the benchmark S&P 500 by 2 percentage points.
Investors are actively monitoring the latest activity of Gabelli at the market. Filings from the end of the first quarter of 2022 show that the portfolio of GAMCO Investors decreased by nearly $600 million to $11 billion compared to late 2021. The fund made new purchases in 49 stocks during the period, additional purchases in 279, sold out of 54, and reduced holdings in 359 stocks. The top ten holdings of the fund, in contrast to other elite hedge funds, comprise just a little over 15% of the entire portfolio.
The Rising Rates Were a “Huge Headwind” For Multiples
Gabelli was recently interviewed by news platform Fox Business and asked to discuss the latest situation at the market. The legendary investor said that the present volatility at the market stemmed from the fear of a rise in interest rates despite the fact that the earnings of companies were “okay”. Per Gabelli, the rising rates were a “huge headwind” for multiples. The chief of GAMCO added that the market was discounting the actions of the central bank, which was preparing for a series of rate hikes in the coming months.
“Not Shifting Portfolios” Amid Panicked Selloff
When asked to comment on whether the Federal Reserve would pivot at all seeing the panic at the markets, Gabelli stressed that there was no chance of that happening since it was pertinent to bring inflation under control to calm the market down. He compared the situation to extracting toothpaste, an action he said cannot be undone. He also outlined that he was “not shifting portfolios” as an investor given the present market panic, but rather focusing on preserving wealth and making more money in the long-term.
The billionaire, whose personal net worth is around $2 billion, also noted that he thought the economy in Europe was going to get better in the coming months unless Putin does “something different” and the same was going to happen in China as Chinese President Xi Jinping gets nominated for the top office again. Gabelli said he was looking to invest in companies with cash flows, just like his peer Warren Buffett. He explicitly warned investors to stay away from growth names during this period.
The latest moves that Gabelli has made at the market reflect some of his thoughts better. For example, the investor has opened new positions in several energy stocks in the first quarter of 2022. Due to the Russian invasion of Ukraine, OPEC disagreements on production, and supply chain problems due to the pandemic, energy prices have reached record highs in this period and are likely to continue to rise even as inflation cools down. Gabelli owns stakes in two European energy giants, and the prices in Europe are nearly fourteen times that in the US.
Our Methodology
The companies listed below were picked from the investment portfolio of GAMCO Investors at the end of the first quarter of 2022. The stocks that are a new addition to the portfolio, compared to filings for the fourth quarter of 2021, and have registered at least a 5% increase in share price year-to-date as of June 1 were selected. Data from around 900 elite hedge funds tracked by Insider Monkey in Q1 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Mario Gabelli Was Right About These 5 Stocks
5. BP p.l.c. (NYSE:BP)
Number of Hedge Fund Holders: 27
Percentage Increase in Share Price (YTD): 19.44%
BP p.l.c. (NYSE:BP) is an energy company headquartered in London. According to the latest filings, GAMCO Investors owned over 11,500 shares of BP p.l.c. (NYSE:BP) at the end of the first quarter of 2022 worth $343,000, representing a very small portion of the portfolio. The company has been previously featured in the GAMCO portfolio, with minor exceptions, since the third quarter of 2012. The fund held the stock consistently between the fourth quarter of 2013 and the first quarter of 2021.
On May 11, investment advisory Morgan Stanley maintained an Overweight rating on BP p.l.c. (NYSE:BP) stock and raised the price target to GBP 540 from GBP 490. Martijn Rats, an analyst at the firm, issued the ratings update.
At the end of the first quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in BP p.l.c. (NYSE:BP), compared to 26 in the previous quarter worth $1.2 billion. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in BP p.l.c. (NYSE:BP), with 25 million shares worth more than $751 million.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), BP p.l.c. (NYSE:BP) is one of the stocks that elite investors are monitoring.
4. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 37
Percentage Increase in Share Price (YTD): 33.80%
Shell plc (NYSE:SHEL) is an energy and petrochemical firm. Latest data shows that GAMCO Investors owned more than 14,600 shares of Shell plc (NYSE:SHEL) at the end of the first quarter of 2022 worth over $807,000, representing a minor portion of the portfolio. On June 1, the company announced that it had obtained the required approval from the United Kingdom government to begin work on the North Sea Jackdaw gas development project. The project has the potential to supply more than 6% of the gas production of the UK.
On May 11, investment advisory Morgan Stanley maintained an Overweight rating on Shell plc (NYSE:SHEL) stock and raised the price target to GBP 2,860 from GBP 2,570. Analyst Martijn Rats issued the ratings update.
At the end of the first quarter of 2022, 37 hedge funds in the database of Insider Monkey held stakes worth $5.6 billion in Shell plc (NYSE:SHEL), compared to 41 in the previous quarter worth $2.6 billion. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Shell plc (NYSE:SHEL), with 19.5 million shares worth more than $1 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Shell plc (NYSE:SHEL) is one of the stocks that hedge funds are buying.
In its Q1 2022 investor letter, Third Point Management, an asset management firm, highlighted a few stocks and Shell plc (NYSE:SHEL) was one of them. Here is what the fund said:
“We have continued to add to our position in Shell plc (NYSE:SHEL), as it trades at the same deeply discounted multiple today that it did last year due to a move up in commodity prices. We are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors. We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell plc (NYSE:SHEL) to effectively manage the energy transition. We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable. Most investors we have discussed this with agree that Shell plc (NYSE:SHEL) would be more successful over the long term with a different corporate structure. Discussions among the parties have been constructive and will be ongoing since stakeholders clearly see these corporate changes as instrumental, particularly if Shell plc (NYSE:SHEL) wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand.
Beyond our discussions around corporate structure, there have been two important developments since our last update. First, Shell plc (NYSE:SHEL) announced a plan to redomicile its headquarters to the UK and create a single shareholder class. This move allows greater flexibility to modify its portfolio (either through asset sales or spin-offs) and allows for a more efficient return of capital, specifically via share repurchases. Second, fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe. Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of Shell plc (NYSE:SHEL) has increased dramatically since our original investment.
While Shell plc (NYSE:SHEL) continues to trade at a large discount to its intrinsic value, with proper management we believe Shell plc (NYSE:SHEL) can simultaneously deliver shareholder returns, reliable energy and decarbonization of the global economy. We look forward to continued engagement with management and other shareholders and to more strategic clarity from Shell plc (NYSE:SHEL).”
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Disclosure. None. Mario Gabelli Was Right About These 5 Stocks is originally published on Insider Monkey.
