Gabelli & Co. is rather well-known for looking at companies for their value in special situations and in possible mergers, to the point that Mario Gabelli is known as “Dr. Love” by the investment community. We have now been given the firm’s list of changes in the Gabelli Focus Five list. The changes made were Ascent Media Corporation (NASDAQ: ASCMA), Coca-Cola Enterprises Inc. (NYSE: CCE), CVS Caremark Corporation (NYSE: CVS), Navistar International Corp. (NYSE: NAV), and Yahoo! Inc. (NASDAQ: YHOO). Those companies removed from the Gabelli Focus Five list this week were BlackRock, Inc. (NYSE: BLK), ITT Corporation (NYSE: ITT), Madison Square Garden (NYSE: MSG), National Fuel Gas Co. (NYSE: NFG), and NII Holdings (NASDAQ: NIHD).
If you want to know why this list matters, the numbers speak for themselves. In 2006, this list performed 19.18% versus 9.51% for the S&P 500; in 2007 that was 4.69% versus -6.93% for the S&P 500, in 2008 that was 9.21% versus -38.30% in the S&P 500, in 2009 that was 88.80% versus 30.03% for the S&P 500, and in 2010 that was 24.38% versus 19.76% for the S&P 500. The return was lower during the first quarter of 2011 at 2.37% versus 6.03% for the S&P 500 Index. We have outlined some of the bullet points below.
Ascent Media Corporation (NASDAQ: ASCMA) is highlighted for its recapitalization with a Buy rating during the sale of media assets and the acquisition of Monitronics, holding $260 million in cash, $60 million in real estate, and significant NOLs (loss carry-forwards). Gabelli’s so-called private market value is put in the mid-$60’s versus about $48.50 currently.
Coca-Cola Enterprises Inc. (NYSE: CCE) as the Western European bottler is expected to generate about $3.7 billion in cash flow thru 2015 for more repurchases. With a share price around $28.40, the Gabelli private market value was put at $36.00. For a comparison, Thomson Reuters has a mean objective price target of only about $30.25.
CVS Caremark Corporation (NYSE: CVS) is one called ‘time to split’ as its trades at a discount to peers with some $5 billion in contract losses and lower margins. Gabelli thinks new management should consider a split-up of the company and gave a sum of the parts value of $52.00 per share versus $36.22 today. For a comparison, this is well above consensus as Thomson Reuters has a mean objective price target of about $38.90.
Navistar International Corporation (NYSE: NAV) is seeing more freight shipping, high fleet utilization, and what is an aging national truck fleet that should all drive demand. Its private market value was put at $80.00 versus about $69.50 today. For a comparison, this is above-consensus as Thomson Reuters has a mean objective price target of about $77.27.
Yahoo! Inc. (NASDAQ: YHOO) is perhaps the biggest or most easily recognized call from Gabelli for investors, with the call that cash and minority stakes in Alibaba Group and Yahoo! Japan come to a value of “at least $13.60 per share” alone in value and believes there is limited downside at only about 2.5-times expected 2011 EBITDA. Gabelli’s private market value was put at $23.00 per share versus anout $17.70 in the market. For a comparison, this is well above average as Thomson Reuters has a mean objective price target of about $19.26.
JON C. OGG
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