Mario Gabelli: What To Do if Market Declines

On August 24, in an interview with CNBC, Mario Gabelli encouraged value investing. He is the CEO, chairman, and founder of Gabelli Asset Management Company (GBL). Also, the company is known as GAMCO Investors.

Gabelli said higher volatility could lead to a 10% to 15% correction. And, he added, “what’s different? Nothing.” On August 23, the Dow declined more than 600 points. Additionally, last week, there has been a spike in the market’s volatility. Moreover, Goldman Sachs expects a volatile October this year.

Mario Gabelli: What To Do if Market Declines

Gabelli sees volatility as a good sign for investors

Mario Gabelli thinks sell-off in the stock market is a good opportunity for investors. This is because they will get some stocks at a lower valuation. Also, investor Warren Buffett shares similar views. The S&P 500 index is near its all-time high of $3,027.9. Yet, after the inversion of the yield curve, the recession fears are rising. The fear of a market correction is on investors’ minds.

The S&P 500 index returned 18% on a YTD (year-to-date) basis. The index returned 46.7% over the last five years. Mario Gabelli said investors should focus on stocks that are cash-generating, have less-leverage, and have visibility. And, in the CNBC interview, he said that the CBS-Viacom merger could be good news for investors. He believes that this merger will unlock a higher value for the shareholders.

Top buys for Gabelli and Singer

In Q2 2019, the top buys of Gabelli’s GAMCO Investors were Anadarko Petroleum Corporation (APC) and The Walt Disney Company (DIS). Also, Array Biopharma, Newmont Goldcorp Corporation (NEM), and PepsiCo, Inc. (PEP) were his top picks.

These stocks made up nearly 0.50%, 0.70%, 0.27%, 0.81%, and 0.58%, of the firm’s portfolio, respectively, in the last quarter. Among these, Array Biopharma was the firm’s fresh buy in Q2 2019. However, famous hedge fund manager Paul Singer has bought a stake worth $3.2 billion in AT&T (T). AT&T is a competitor to the Walt Disney Company.

Top holdings

The top five holdings of the firm in the Q2 2019 were Mastercard Incorporated (MA), NextEra Energy, Inc. (NEE), and National Fuel Gas Company (NFG). Also, American Express Company (AXP) and Honeywell International Inc. (HON) were in the top five. These stocks represented 1.40%, 1.15%, 1.12%, 1%, and 0.99% holdings of the firm’s portfolio, respectively, in the same quarter. 

The top holdings of the firm Mastercard Incorporated showed a great performance on a YTD basis. It returned 42.7% during the same period. Currently, the stock is trading at $269.13. Its price-to-earnings ratio is 42.7x. The Dow Jones US Financial Index PE ratio is at 16.5x. Notably, Warren Buffett’s portfolio is made up of about 24% in Apple. Gabelli’s portfolio has different stocks. None of the stocks make up more than 2% of his portfolio.

The Industrial Sector versus Energy

Overall, the firm has a good investment percentage in all the major 10 sectors. Around 19% of Mario Gabelli’s portfolio has invested in the industrial sector. And, the industrial sector makes up the top sector in the firm’s portfolio. Plus, the Industrial Select Sector SPDR Fund (XLI) tracks the industrial sector’s performance. It returned 19.74% on a YTD basis, as of September 27, 2019.

By comparison, the firm has the lowest investment in the energy sector. It makes up nearly 4.5% of the firm’s portfolio. The Energy Select Sector SPDR Fund (XLE), which tracks the energy sector’s performance, has risen 3% in 2019 so far. 

Compared to Gabelli’s views, fund manager Carl Icahn has a lot of exposure to energy and industrial stocks. Read Will Carl Icahn’s Fears Come True in October?

Gabelli’s top sells

Mario Gabelli’s top sells in Q2 2019 were ARRIS International Limited (ARRS) and Integrated Device Technology Inc. (IDTI). Also, GoldCorp Inc. (GG), Ellie Mae (ELLI), and USG Corp. (USG) were in the top.

The firm reduced nearly 0.58%, 0.48%, 0.41%, 0.41%, and 0.37% from these stocks, respectively, in the same quarter. However, the firm completely sold out its position on stocks like Hovnanian Enterprises, Oracle Corporation, and Dell Technologies in Q2 2019.