Mario Gabelli on Two Stocks That Will Double
Mario Gabelli, Gamco Investors chairman, CEO & CIO, was on CNBC yesterday with Joe Kernen touting two stocks he believed would double in price. Kernen noted that everything would double given enough time. Gabelli replied looking back at 1973’s nifty fifty stocks selling at 50 times earnings, they didn’t double. Cisco in 1999 didn’t double so time does help, he added.
Gabelli noted over time economies will grow on a global basis, global weighted, at three percent plus inflation.
Gabelli said he picked ten stocks in Barron’s which are available to anyone who wants to look at the roundtable, but he had two more that weren’t in the publication.
Gencorp (GY), a small cap company with 82 million fully diluted shares trades at $10.75, purchased Rocketdyne which they are closing the deal on according to Gabelli. The basic manufacturing business, which has short-term hickups, will earn about 70 cents in 3-4 years. They have significant acreage in Sacramento where the real estate is booming, Gabelli said.
Gabelli’s second pick was Legg Mason (LM), which Gamco just disclosed a 5% ownership stake in. Gabelli stated LM was buying their stock back which has reduced their share count from 164 million to 128 million. LM announced that 2/3rds of their cash flow is going to buying back stock. The investment business is a great cash generator and they’re solving a lot of their various issues, Gabelli concluded.
The smaller cap GY had a substantial move following Gabelli’s mention of it.
Back in August 2012, Gabelli discussed following well-known investors (Ackman, Malone, and Icahn) and specifically mentioned Bill Ackman’s purchase of JC Penney (JCP) of which Gabelli had purchased a stake in [link]. That one hasn’t worked out so well yet.