Micro-cap company Penford Corporation (NASDAQ:PENX) has been upgraded in the equity portfolio of Mario Gabelli‘s GAMCO Investors, as a new filing with the Securities and Exchange Commission showed. GAMCO disclosed holding 51,300 shares of the company, up from 20,600 shares revealed in its latest 13F filing. However, together with its affiliates, Gabelli Funds, GSI and Teton, the aggregate stake contains 684,040 shares, which represent 5.35% of the company’s outstanding stock. The position is activist by nature.
Mr. Gabelli is a big name on Wall Street, with his fund managing to beat S&P 500 by around 2% per year since its inception in 1986. Due to his outstanding performance, the manager of GAMCO was awarded the title of Morningstar’s Fund Manager of the Year in 1997 and Institutional Investor’s Money Manager of the Year in 2010. One of Mr. Gabelli’s main approaches towards investing is to purchase stakes in companies that can be worth more in the private markets than as publicly traded companies. The strategy seems to work, as can be observed by taking a look at some of the positions that GAMCO owns. For example, the fund has recently reported raising its stake in Volcano Corporation (NASDAQ:VOLC), to 3.56 million shares (held in aggregate with affiliates). In December, Volcano entered into an agreement to be acquired by Royal Philips, which sent its stock soaring. However, as the stock inched down following a lawsuit launched by a shareholder of Volcano, Mr. Gabelli decided to further raise the stake in the company.
Penford Corporation (NASDAQ:PENX) is no exception to the rule, as the company is also involved in a merger process. In October, the company signed a definitive merger agreement with Ingredion Inc (NYSE:INGR), under the terms of which the former will purchase all outstanding shares of Penford for $19.00 per unit. However, the stock has been trading below $18.50 in the past couple of weeks, which prompted Mr. Gabelli to take advantage of the situation and earn more profits from the merger.
Both Penford Corporation (NASDAQ:PENX) and its buyer Ingredion Inc (NYSE:INGR) are two companies engaged in the food processing industry. However, Penford is engaged in the development and production of natural-based ingredient systems for food and industrial applications, including fuel grade ethanol. Ingredion produces starch and sweetner ingredients for packaged food, beverage, brewing and other industries. Therefore, their merger will create a company with a larger portfolio and more opportunities.
GAMCO initiated a stake in Penford Corporation (NASDAQ:PENX) during the third quarter of 2014, while the share price grew by around 14% since October. Moreover, other investors will also profit from the merger. However, it is important to mention that among funds that we track, the majority of them closed their positions during the July-September period. However, at the end of September, Paul Orlin and Alex Porter’s Amici Capital held 1.23 million shares and Gavin Saitowitz and Cisco J. Del Valle’s Springbok Capital held 8,500 shares.
Disclosure: none
