Gabelli’s New Focus Five Picks (HSNI, MJN, AMTD, TIVO, WFT, CVC, KOF, STZ, MA, ESI)
May 3, 2010 by Jon C. Ogg
GAMCO Investors, Inc. (NYSE: GBL) is the parent of Gabelli & Company and is run by the very well known investment manager Mario Gabelli. This morning came the release of Gabelli’s new FOCUS FIVE stocks for the May 3 to July 30 period. These picks are HSN Inc. (NASDAQ: HSNI), Mead Johnson Nutrition Company (NYSE: MJN), TD AMERITRADE Holding Corporation (NASDAQ: AMTD), TiVo Inc. (NASDAQ: TIVO), and Weatherford International Ltd. (NYSE: WFT). The details for each and the return of the portfolio is listed below.
Gabelli said that for the period ending April 30, the Focus Five outperformed the S&P 500, and is now +184.47% since inception (Jan. 31, 2006) vs. -2.18% for the S&P.
HSN Inc. (NASDAQ: HSNI) is listed as Strong Comps + Takeout… “The second-largest multichannel commerce network in the US had 2009 sales of $2.8 billion with EBITDA of $194 million. We believe multichannel retail is in the early stages of renewed secular sales growth, and that HSN’s experienced management team should be able to improve EBITDA margins substantially.Focus on the Liberty Media standstill agreement, which limits its ownership to 32% and expires in August 2010. We believe there are strategic advantages in a combination of HSNI and QVC. At ~7x 2011P EBITDA $257 million, we view shares as attractive based on current market dynamics and the potential for improved profitability and multiple expansion.”
Mead Johnson Nutrition Company (NYSE: MJN) is listed as Strong EM Growth… “The pediatric nutrition market category is expected to increase from $23 billion to over $30 billion by 2014. MJN has leading share in the U.S. as well as many emerging markets, and currently operates in 139 cities in China. Focus on MJN’s growth in emerging markets, most notably China, which grew by 25% in Q409. We continue to view MJN as an attractive target for strategic acquirers who are looking to increase their exposure to fast-growing, healthy product categories.
TD AMERITRADE Holding Corporation (NASDAQ: AMTD) is listed as Financial Leverage… “As a leader in the online brokerage industry, AMTD is well positioned to participate from industry growth and consolidation. AMTD has increased client assets at a 7% annual rate, including $62 billion in net new assets. As a holder of a large float of customer assets ($52.3 billion in spread-based balances), we believe the first 100 bps change in the Fed Funds rate could improve annual earnings by about $0.28/shr.”
TiVo Inc. (NASDAQ: TIVO) is listed as En Banc = Endgame… “We believe TIVO’s intellectual property to pause / rewind / play live TV makes them a likely takeover target to a variety of potential acquirers, including technology companies Cisco, Microsoft or Apple and distributors such as DISH or DTV. TIVO trades at a significant discount to our 2011 PMV of $22 based on DISH and other operators entering contracts of $1.50+ per sub per month creating high margin recurring revenue. We expect DISH’s en banc review to be rejected.”
Weatherford International Ltd. (NYSE: WFT) is listed as Performance Back on Track… “A unique global footprint positions WFT to capitalize on growing exploration and production in key markets such as Russia and Iraq. Weatherford’s expanded product offering in the $13B directional drilling services market provides revenue growth opportunities and makes it an attractive acquisition target for a larger energy services company. Focus on sequential quarterly earnings improvement as WFT is more levered to a recovery in international oil directed drilling activity and a restoration of institutional investor confidence following renewed quarterly guidance. WFT trades at a compelling valuation 16.5x 2011 EPS of $1.10, 8x EBITDA, and a discount to our PMV of $22.”
Those removed from the FOCUS FIVE list are Cablevision Systems (NYSE: CVC), Coca-Cola FEMSA (NYSE: KOF), Constellation Brands (NYSE: STZ), Mastercard, Inc. (NYSE: MA) and ITT Educational Services (NYSE: ESI).
JON C. OGG
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