During his appearance on CNBC's 'Squawk Box' on May 5, Mario Gabelli, the billionaire CEO of GAMCO Investors, acknowledged that he identifies himself as a long-term value investor. Rather than solely considering company fundamentals, he emphasizes a broader perspective. Gabelli praised Warren Buffett's strategy in the financial sector, noting that Buffett tends to prefer investing in insurance companies over banks due to the volatility and risk associated with bank failures and subsequent financial losses. He also strongly criticized the mishandling that resulted in the collapses of Silicon Valley Bank, Signature Bank, and First Republic Bank. On the other hand, Mario Gabelli noted that the long-term health of businesses seems healthy based on cash flow, reduced double ordering, and inventories coming down. However, in the short-term, these companies are facing staggering interest rates on borrowing.
Mario Gabelli, in an interview with Markets Insider on April 4, warned that American investors could potentially encounter a recession in the near future. He also expressed concerns about potential stock market declines, a decrease in house prices, and the lingering effects of the banking crisis. The billionaire told Markets Insider:
"I see an economic slowdown in the second half of 2023, probably a recession."
Nonetheless, Gabelli forecasted that the downturn wouldn't be overly severe due to anticipated federal infrastructure initiatives and increased government spending in preparation for the upcoming presidential election. These measures are expected to boost demand. Additionally, Gabelli pointed out that companies relocating their operations back to the country and the recovery of countries like China could help mitigate the effects of the economic slowdown. He further said:
"The Fed is unlikely to bend at the moment. They'll stay the course and raise rates."
As per Markets Insider, Gabelli emphasized the potential danger of a credit crunch that could arise if customers continue to transfer their deposits from smaller banks to larger ones or money-market funds. He also highlighted the possibility of lenders becoming more cautious and scaling back their lending activities due to concerns about potential bank runs. Gabelli noted that tighter financing conditions could have a significant impact on the housing and commercial real estate sectors, as both heavily rely on loans for their operations.
In this article, we discuss the 10 newest value stocks that billionaire Mario Gabelli added to his Q1 2023 portfolio. Among these additions are Philip Morris International Inc. (NYSE:PM), Univar Solutions Inc. (NYSE:UNVR), and Garrett Motion Inc. (NASDAQ:GTX).
Our Methodology
This list comprises value stocks that Mario Gabelli's GAMCO Investors added to its portfolio during the first quarter of 2023. The selection criteria focused on stocks with price-to-earnings (P/E) ratios below 20 as of May 23. The list is ranked in ascending order based on the percentage of stake held by GAMCO. We have also mentioned the hedge fund sentiment around the securities as of Q1 2023.
10 Best Value Stocks to Buy in 2023 According to Billionaire Mario Gabelli
Mario Gabelli of GAMCO Investors
Best Value Stocks to Buy in 2023 According to Billionaire Mario Gabelli
Caterpillar Inc. (NYSE:CAT) designs, manufactures, and sells machinery, engines, and related products used in construction, mining, forestry, energy, transportation, and other industries. The company is known for its iconic yellow construction equipment, including bulldozers, excavators, loaders, and motor graders. In the first quarter of 2023, Gabelli added Caterpillar Inc. (NYSE:CAT) to his portfolio by acquiring 1,358 shares worth $310,765. It is one of the best value stocks in GAMCO Investors’ portfolio.
In light of the recent earnings season for the industrial machinery sector, analyst David Raso from Evercore ISI maintained an Outperform rating on Caterpillar Inc. (NYSE:CAT) on May 9. However, he adjusted the firm's price target for the company's shares to $263 from $288. After assessing the first quarter results, the firm increased its earnings per share (EPS) estimates for fiscal year 2023 by an average of 5%-7%. However, they trimmed the estimates for fiscal year 2024 by approximately 2%-3%. Evercore noted that while strong reports were initially well-received, concerns about macroeconomic factors led to expectations of EPS reductions in late 2023 and 2024, potentially resulting in a decline in earnings for those years.
According to Insider Monkey’s first quarter database, 52 hedge funds were bullish on Caterpillar Inc. (NYSE:CAT), compared to 50 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company.
In addition to Philip Morris International Inc. (NYSE:PM), Univar Solutions Inc. (NYSE:UNVR), and Garrett Motion Inc. (NASDAQ:GTX), Caterpillar Inc. (NYSE:CAT) is one of the best value stocks to buy in 2023 according to Mario Gabelli.
Diamond Hill Large Cap Strategy made the following comment about Caterpillar Inc. (NYSE:CAT) in its Q4 2022 investor letter:
“In the case of Caterpillar Inc. (NYSE:CAT), the company reported a better-than-expected Q3 as demand in mining, non-residential construction and energy remained healthy through the year even as recession fears grew. Caterpillar showed strong pricing power and operating efficiency in the face of supply chain constraints and labor shortages, which in turn contributed to better-than-expected share price performance.”
Titan International, Inc. (NYSE:TWI) engages in the production and distribution of wheels, tires, undercarriage systems, and related components for off-highway vehicles. The company operates within three main segments – Agricultural, Earthmoving/Construction, and Consumer. In Q1 2023, Mario Gabelli’s GAMCO Investors added Titan International, Inc. (NYSE:TWI) to its portfolio by picking up 50,000 shares worth $524,000. It is one of the best value stocks according to Gabelli.
On May 3, Titan International, Inc. (NYSE:TWI) reported a Q1 non-GAAP EPS of $0.53, beating Wall Street estimates by $0.04. However, the revenue of $549 million missed market consensus by $10.52 million. At the close of the first quarter of 2023, the company's cash and cash equivalents amounted to $164.1 million, as opposed to $159.6 million on December 31, 2022.
According to Insider Monkey’s first quarter database, 20 hedge funds were bullish on Titan International, Inc. (NYSE:TWI), and Mark Rachesky’s MHR Fund Management held the largest stake in the company, comprising 8 million shares worth approximately $84 million.
Toll Brothers, Inc. (NYSE:TOL) is engaged in the design, construction, promotion, sale, and financing of different types of high-end detached and attached homes within upscale residential neighborhoods across the United States. In Q1 2023, Toll Brothers, Inc. (NYSE:TOL) was a new arrival in Mario Gabelli’s 13F portfolio, with the billionaire purchasing 10,700 shares of the company worth $642,321.
After Toll Brothers, Inc. (NYSE:TOL) reported fiscal Q1 earnings per share that surpassed both the firm's and consensus estimates, BofA analyst Rafe Jadrosich increased the firm's price target on the shares from $68 to $70. Jadrosich maintained a Buy rating on Toll Brothers, Inc. (NYSE:TOL) on February 23, citing better-than-expected orders and a significant improvement in demand year-to-date. Although the firm acknowledged that short-term trends could be influenced by fluctuations in mortgage rates, it expressed increased confidence that Toll Brothers, Inc. (NYSE:TOL) will likely continue to expand its book value and sustain a return-on-equity that surpasses its cost of capital.
According to Insider Monkey’s first quarter database, 37 hedge funds were long Toll Brothers, Inc. (NYSE:TOL), with collective stakes worth $882.2 million. Edgar Wachenheim’s Greenhaven Associates held the largest position in the company, comprising 5.3 million shares worth $321 million.
Baron Funds made the following comment about Toll Brothers, Inc. (NYSE:TOL) in its Q4 2022 investor letter:
“Toll Brothers, Inc. (NYSE:TOL) is the leading luxury homebuilder in the U.S. with a capable management team as well as a large and valuable owned land portfolio. Toll Brothers is more insulated than its peers from elevated mortgage rates because 20% of the buyers of Toll homes pay 100% in cash.
Beacon Roofing Supply, Inc. (NASDAQ:BECN) is involved in the distribution of roofing materials for residential and non-residential purposes, as well as other building products that complement roofing, to contractors, home builders, building owners, lumberyards, and retailers in the United States and Canada. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is a new addition in Mario Gabelli’s Q1 2023 portfolio, with the billionaire buying 11,129 shares worth $654,942.
On May 5, Deutsche Bank analyst Joe Ahlersmeyer raised the firm's price target on Beacon Roofing Supply, Inc. (NASDAQ:BECN) to $86 from $85 and reiterated a Buy rating on the shares following the Q1 results.
According to Insider Monkey’s first quarter database, 19 hedge funds were bullish on Beacon Roofing Supply, Inc. (NASDAQ:BECN), compared to 24 funds in the earlier quarter. David Cohen and Harold Levy’s Iridian Asset Management is the biggest position holder in the company, with 438,549 shares worth $25.80 million.
Here is what Fiduciary Management has to say about Beacon Roofing Supply, Inc. (NASDAQ:BECN) in its Q3 2021 investor letter:
“Beacon is the largest publicly traded (#2 overall) distributor of roofing materials and complementary building products in the U.S. and Canada. Beacon serves more than 90,000 customers and offers 140,000 SKUs from over 400 branches throughout all 50 states (97% of sales) and 6 Canadian provinces (3% of sales). Beacon makes 1.7 million annual deliveries (within a two-hour radius) using its fleet of specialized trucks. Since the sale of the non-core Interiors division (2021), their run-rate sales have been 53% Residential Roofing; 25% Commercial Roofing; and 22% Complementary Building Products (siding, windows, specialty exterior building products, insulation, and waterproofing systems). (Click here to continue reading)
GE HealthCare Technologies Inc. (NASDAQ:GEHC) is involved in the advancement, production, and promotion of different products, services, and digital solutions that support the diagnosis, treatment, and monitoring of patients. It operates through four segments – Imaging, Ultrasound, Patient Care Solutions, and Pharmaceutical Diagnostics. GE HealthCare Technologies Inc. (NASDAQ:GEHC) is one of the best value stocks to buy according to Mario Gabelli. The billionaire acquired a position worth $660,424 in the company during the first quarter of 2023.
On May 15, Oppenheimer analyst Suraj Kalia initiated coverage of GE HealthCare Technologies Inc. (NASDAQ:GEHC) with an Outperform rating and a $97 price target. The analyst described GE HealthCare Technologies Inc. (NASDAQ:GEHC) as a global leader in healthcare diagnostics, imaging, and intervention, emphasizing its extensive range of products in areas such as X-rays, CT scans, MRI scans, ultrasound, services, and digital solutions. The analyst believes that GE HealthCare Technologies Inc. (NASDAQ:GEHC)’s forward price-to-earnings (P/E) multiple of 22 times is lower than the average applied to large-cap medical technology companies, but considers this valuation appropriate given the current stage of GE Healthcare's development as an independent entity.
According to Insider Monkey’s first quarter database, 37 hedge funds were bullish on GE HealthCare Technologies Inc. (NASDAQ:GEHC), up from 8 funds in the prior quarter.
Like Philip Morris International Inc. (NYSE: PM), Univar Solutions Inc. (NYSE: UNVR), and Garrett Motion Inc. (NASDAQ:GTX), GE HealthCare Technologies Inc. (NASDAQ:GEHC) is one of the top value stocks in Mario Gabelli’s Q1 portfolio.
Vulcan Value Partners made the following comment about GE HealthCare Technologies Inc. (NASDAQ:GEHC) in its Q1 2023 investor letter:
“We sold GE HealthCare Technologies Inc. (NASDAQ:GEHC) during the quarter. GE HealthCare is a recent spin-off from General Electric Company and provides imaging, ultrasound, patient care solutions and pharmaceutical diagnostics to customers around the world. The company is a leader in a global oligopoly and has a massive installed base. Half of the company’s revenue is recurring, margins are stable to rising, and it generates significant free cash flow. As a recent operating unit inside of GE, we believe the market has been undervaluing this asset. Although the spin price reflected this under-valuation, after the spin-off, its stock price rose to meet our estimate of its intrinsic value, and we sold the position. GE HealthCare remains on our MVP list.”
