Below we present the list of the top 5 small-cap stocks added to billionaire Mario Gabelli’s portfolio. For our methodology, the additional background of Mario Gabelli, and a more comprehensive list of the billionaire money manager’s stock picks, please see Top 10 Small-Cap Stocks Added to Billionaire Mario Gabelli’s Portfolio.
5. Veoneer, Inc. (NASDAQ:VNE)
Value of GAMCO Investors’ 13F Position: $1.03 million
Number of Hedge Fund Shareholders: 29
Veoneer, Inc. (NASDAQ:VNE) is another merger play that was added to the 13F portfolio of Mario Gabelli during Q4, as the company is set to be acquired by SSW Partners and QUALCOMM Incorporated (NASDAQ:QCOM) for $37 per share on April 1.
Upon the completion of the merger, Veoneer, Inc. (NASDAQ:VNE)’s current chairman, president, and CEO, Jan Carlson will be replaced by Jacob Svanberg, who currently serves as the company’s senior VP lidar product area and corporate development. Carlson will be appointed as an advisor to the board, and to the new CEO.
Veoneer, Inc. (NASDAQ:VNE) was originally set to be acquired by Canadian auto parts giant Magna International Inc. (NYSE:MGA) for $31.25 per share in a deal that had been approved by the shareholders of both companies. Qualcomm later swooped in with a higher bid, which Magna refused to match, collecting a $110 million merger termination fee from Veoneer instead.
4. KKR Real Estate Finance Trust Inc. (NYSE:KREF)
Value of GAMCO Investors’ 13F Position: $1.04 million
Number of Hedge Fund Shareholders: 8
The number of hedge fund shareholders of KKR Real Estate Finance Trust Inc. (NYSE:KREF) in our database doubled to eight during Q4, with GAMCO Investors being one of the funds to take a new stake in the real estate financing company.
KKR Real Estate Finance Trust Inc. (NYSE:KREF) originated 37 loans in 2021, more than half of which were from repeat borrowers. The total value of KKR’s originations topped $1 billion during each of the past two quarters, and the company expects that to be the norm going forward.
KKR Real Estate Finance Trust Inc. (NYSE:KREF) pulled in GAAP net income of $0.59 per share in Q4. However, distributable earnings came in at negative $0.05 per share owing to the company writing off $0.55 per share worth of loans as realized losses.
3. GARRETT MOTION Pref Shs (NASDAQ:GTXAP)
Value of GAMCO Investors’ 13F Position: $4.61 million
Number of Hedge Fund Shareholders: 28
Several prominent money managers took stakes in GARRETT MOTION Pref Shs (NASDAQ:GTXAP) during Q4, including Gabelli, Howard Marks, Seth Klarman, and Prem Watsa. GAMCO Investors bought 504,220 shares of GTXAP.
GARRETT MOTION Pref Shs (NASDAQ:GTXAP) achieved $3.6 billion in net sales in 2021, a 20% year-over-year increase on a GAAP basis. According to the company, its growth rate outpaced global auto production by 12.5 percentage points, being driven in large part by the company’s aftermarket and commercial vehicle businesses, which grew sales by 21% and 25% respectively last year.
While Garrett Motion has been facing the same supply chain challenges that have beset so many industries, hedge funds appear to be confident about the company’s transition to electric vehicle products and its growing ability to return cash to shareholders.
Here is what Alluvial Capital Management had to say about GARRETT MOTION Pref Shs (NASDAQ:GTXAP) in its Q4 2021 investor letter:
“Garrett Motion is also feeling the effects of the troubles with global supply chains. Difficulties in sourcing semiconductors have led many large automotive manufacturers to slow production, which in turn delays orders for Garrett Motion’s turbochargers. Still, the environment has not prevented Garrett Motion from making progress on improving its balance sheet and beginning to return capital. In November, the company announced a plan to repurchase $100 million in common and preferred stock. Then in December, Garrett Motion announced it would accelerate the planned redemption of its Series B preferred stock held by Honeywell. By this time next year, Garrett Motion will have meaningfully reduced its liabilities and bought in quite a bit of stock at a very attractive price. As supply chains normalize, the company’s earnings and cash flow will benefit, giving the company the ability to return more capital to shareholders and invest in the transition to products for electric vehicles.”
2. Kyndryl Holdings Inc. (NYSE:KD)
Value of GAMCO Investors’ 13F Position: $5.11 million
Number of Hedge Fund Shareholders: 27
27 hedge funds, including GAMCO Investors, were shareholders of Kyndryl Holdings Inc (NYSE:KD) following the company’s Q4 spinoff from International Business Machines Corporation (NYSE:IBM).
While that figure sounds moderately impressive on its own for a small-cap company, it’s less so when one considers that there were 46 IBM shareholders in our database, all of whom received Kyndryl Holdings Inc (NYSE:KD) shares upon the Q4 spinoff. Thus, nearly half of IBM’s own shareholders wanted nothing to do with its former managed infrastructure services business, which will remain a prominent IBM customer.
It’s not hard to see why, as Kyndryl Holdings Inc (NYSE:KD) was one of the slower-growing and lower-margin segments of IBM, which itself isn’t exactly growing like gangbusters or achieving fat margins. For that reason, KD shares have hit the ground staggering like a punch drunk boxer, losing over 67% of their value since being forced to stand on their own two feet back in November.
1. SPX FLOW, Inc. (NASDAQ:FLOW)
Value of GAMCO Investors’ 13F Position: $5.40 million
Number of Hedge Fund Shareholders: 31
Topping the list is SPX FLOW, Inc. (NASDAQ:FLOW), which not only got the largest investment from Mario Gabelli among his new small-cap stock picks, but which also has more hedge fund shareholders in our database than any of the other stocks on this list (tied with Bottomline). The hedge funds tracked by Insider Monkey owned over 12% of FLOW’s shares on December 31.
The possibility of a takeover also played a role in SPX FLOW, Inc. (NASDAQ:FLOW)’s recent performance, with shares jumping by 39% since an unsolicited takeover attempt by Ingersoll Rand Inc. (NYSE:IR) last year for $85 per share. While that deal was rejected, the maker of precise measurement tools ended up accepting an only marginally better $86.50 per share offer from Lone Star Funds in December, owing in part to shareholder pressure to consummate a deal.
Here is what Diamond Hill Small Cap Fund had to say about SPX FLOW, Inc. (NASDAQ:FLOW) and the potential sale of the company in its Q3 2021 investor letter:
“On an individual holdings’ basis, top contributors to return included SPX Flow. SPX Flow, a manufacturer of industrial flow control systems such as pumps, valves and mixers, benefited from news it had been approached by Ingersoll Rand about a possible acquisition. SPX rejected the proposal but is reviewing its strategic options, including interest from two other potential buyers. To us, this is a sign the market still undervalues this quality business but other strategic buyers see the value we do. We are confident management will either hold out for a price reflective of long-term intrinsic value or continue to execute as a standalone company, growing intrinsic value at an attractive rate for years to come.”
For more on the latest trades made by some of the biggest hedge fund managers in the world, check out 10 Oil & Gas Stocks to Buy Today According To Rajiv Jain’s GQG Partners and 10 Stocks to Buy According to Canyon Capital Advisors.
