We recently published a list of Mario Gabelli Stock Portfolio: The 10 Best Stocks to BuyIn this article, we will look at how Mueller Industries, Inc. (NYSE:MLI) compares to the other stocks recommended by Mario Gabelli.
GAMCO Investors, Inc., formerly Gabelli Asset Management Company, is a major American company based in Rye, New York. The company specializes in investment advisory and brokerage services for mutual funds, institutional clients and select investors. The company was founded and is majority owned by Mario Gabelli, who has earned over $750 million in recent years.
Veteran investor Mario Gabelli has made millions of dollars by betting on the unloved companies. He likes to invest in companies that are NOT followed or covered by Wall Street analysts. If the companies are not part of an index, that makes them even more attractive.
The hedge fund manager remains true to active value investing. His investment philosophy of focusing on value stocks rather than growth stocks prevailed even when passive index funds and Nasdaq “FAANG” dominated the market during the US Federal Reserve’s loose interest rate policy. His investment secret is simple: “Find a good company with good management, buy the stock at a reasonable price and then hold that stock for the long term.”
According to Insider Monkey’s database for Q2 2024, industrial goods account for about 21.7% of the total investment portfolio.
What lies in the future for the US stock market according to Gabelli Funds
Gabelli Funds expects the US presidential election to increase market volatility in the second half of 2024. At the same time, the highly anticipated interest rate cuts in September could spur rotation into areas of the market that have lagged throughout the year. The investment firm expects increased volatility as a result of the election. However, economic weakness and volatility are expected to be offset by underlying rotation and lower interest rates.
Gabelli seems optimistic about the U.S. economy as a whole. He believes companies have healthy cash flows and gross margins are better. The only thing that could weigh on U.S. stocks is geopolitical risk.
Gabelli recently participated in Barron’s prestigious roundtable discussion. He estimates that global GDP, as measured by the International Monetary Fund, is expected to be around $115 trillion in 2025. The US contributes 26% and China 17%. The consumer accounts for about 70% of the US economy, and industrial spending accounts for about 12%.
Mario Gabelli mentioned that the Fed is focused on the four Rs. The first is to “keep interest rates high for longer.” The second R is “the continued emptying of the central bank’s balance sheet,” which is currently $60 billion a month, compared to about $95 billion in early 2024. Next, the Fed continues to make efforts to “reduce aggregate demand.” However, higher government spending continues to offset these efforts. Finally, the chairman continues to deploy “rhetoric about reducing inflation.”
Mergers and acquisitions (M&As) and other financing structuring strategies are expected to increase significantly for numerous reasons. Gabelli believes that several private equity funds are nearing the end of their 10-year life cycle and limited partners (LPs) need liquidity. Therefore, this situation will lead to higher turnover. Mario Gabelli expects M&A to pick up globally in H2 2024.
While the S&P 500 is up over 15% year-to-date, the experienced investor believes stocks can deliver an annual growth rate of about 8% in the coming years, well above the returns from fixed income securities.
Mario Gabelli is optimistic about these sectors
Mario Gabelli seems to have an increasing interest in sports franchises. Sports will continue to be the focus of linear television and streaming. Rumor has it that media companies are shelling out large sums for broadcast and streaming rights.
In addition, the experienced hedge fund manager, like other market experts, believes that artificial intelligence is a great technology.
Gabelli’s next choice is natural gas. He believes there is huge potential for prices to increase over the next few years. This is because some producers are shutting down their wells or producing less and demand continues to rise relative to power generators and LNG exports.
At Insider Monkey, we’re obsessed with the stocks hedge funds invest in. The reason is simple: Our research shows we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A worker welds a pipe joint in a metal processing plant.
Mueller Industries, Inc. (NYSE:MLI)
Value of GAMCO investor stake: $189.3 million
Percentage of GAMCO Investors’ 13F portfolio: 2.05%
Number of hedge fund owners: 25
Mueller Industries, Inc. (NYSE:MLI) is engaged in the manufacture of copper, brass, aluminum and plastic products. The company operates in three business segments: piping systems, industrial metals and air conditioning. In recent years, the company has benefited from increased demand in the construction and industrial sectors.
In 2013, gross margins were around 13%. In fiscal 2023, gross margins were over 23%. Therefore, the company has strong and sustainable pricing power for its goods. In the short to medium term, Mueller Industries, Inc. (NYSE:MLI) should be supported by an expected recovery in construction activity and interest rate cuts. The company’s diversified product line serving numerous industries as well as its strong distribution network should continue to act as growth drivers.
Wall Street analysts believe that continued investment in infrastructure and construction could support the company, as these sectors are the main drivers of demand for its products. Recently, the company announced that it would invest $20 million in the UK pipe mill and refinery. This will enable copper pipe mills to melt down and recycle scrap. In addition, the company recently emphasized that its internal investments continue to pay off. It expects these investments to bring even greater benefits as market conditions improve.
The acquisition of Nehring Electrical Works, completed in Q2 2024, provides a solid platform for expansion in the energy infrastructure space. According to Insider Monkey’s Q2 2024 database, 25 hedge funds were long Mueller Industries, Inc. (NYSE:MLI).
Diamond Hill Capitalan investment management company, released its third quarter 2023 investor letter and mentioned Mueller Industries, Inc. (NYSE:MLI). Here’s what the fund said:
“We also opened short positions in Mueller Industries, Inc. (NYSE:MLI), Bank of Hawaii, Alarm.com Holdings and Garmin in the third quarter. Mueller Industries is a leading manufacturer of copper pipe and tubing for plumbing and HVAC systems – a cyclical industry with largely commoditized products that has experienced significant margin expansion in recent years coupled with tailwinds that we expect will likely reverse in the coming years. In addition, we expect long-term volume trends to likely remain sluggish as copper pipe continues to lose market share to plastic over time. Because we expect profitability to return to historical levels over time, we initiated a short position during the quarter.”
Total MLI 2nd place on our list of the best stocks to buy according to Mario Gabelli. While we recognize MLI’s potential as an investment, we believe some highly undervalued AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued AI stock that shows more promise than MLI but trades at less than 5 times its earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
