Recent Annual Report - Gabelli
Recent Annual Report - Gabelli
Recent Annual Report - Gabelli
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Let’s Talk Stocks<br />
The following are stock specifics on selected holdings of our Fund. Favorable earnings prospects do not<br />
necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop<br />
over time. Individual securities mentioned are not necessarily representative of the entire portfolio. For the<br />
following holdings, the percentage of net assets and their share prices stated in U.S. dollars or U.S. dollar<br />
equivalent terms are presented as of December 31, 2012.<br />
ADT Corp. (0.5% of net assets as of December 31, 2012) (ADT - $46.49 - NYSE) is a Boca-Raton, Florida<br />
based provider of electronic alarm monitoring products and services to U.S. residences and small businesses.<br />
The company is a subsidiary of Tyco International Ltd. (0.5%) and boasts strong brand recognition for its<br />
brands ADT, ADT Pulse, and Companion Service. ADT dominates the market even in the highly competitive<br />
alarm monitoring industry and will likely retain its market share alongside continued growth in the electronic<br />
security industry at large. The company expects consistent free cash flow generation in the near term due to<br />
a recently approved share repurchase program set to last three years and expire in November 2015.<br />
AMC Networks Inc. (2.1%) (AMCX - $49.50 - Nasdaq) owns and operates cable networks: AMC, WE tv, IFC,<br />
and The Sundance Channel. In addition, the company owns IFC Entertainment, an independent film<br />
distribution company, and AMC Network Communication, a network programming origination and distribution<br />
company. The AMC channel is highly rated and has benefited from growing popularity in an attractive and<br />
affluent demographic which should aid advertising sales. AMC offers the potential for levered equity returns and<br />
could be an attractive acquisition candidate to a number of large cable network operators.<br />
CBS Corp. (4.2%) (CBS - $37.98 - NYSE) operates the CBS television network, the premium cable network<br />
Showtime, owns 29 local television stations, 130 radio stations, and the third largest international outdoor<br />
advertising network. We believe CBS has a number of opportunities to generate incremental non-advertising<br />
revenue from the sale of existing content to OVDs (online video distributors) and through retransmission consent<br />
agreements with traditional distributors. In addition, we expect a continued recovery in advertising, especially in<br />
radio and outdoor, to contribute to earnings growth. Finally, we believe financial engineering, including the<br />
announced $3 billion share buyback or a potential spin-off of CBS Outdoor, could act as a catalyst for shares.<br />
CIRCOR International Inc. (1.0%) (CIR - $39.59 - NYSE) is a manufacturer of highly engineered products for<br />
the energy, aerospace, and flow control markets. In the energy market, the company makes ball, needle,<br />
butterfly, gate, and other valves for the drilling, production, separation, and transmission of oil and gas for large<br />
international energy projects and for small-to-medium size projects within North America. In the aerospace<br />
group, CIR manufactures landing gears, precision valves, pressure switches, regulators, actuators, and electric<br />
motors for air transports, cargo aircraft, regional jets, business airplanes, helicopters, and unmanned vehicles.<br />
In the flow control market, the company makes valves, fittings, and controls for the power generation, HVAC,<br />
steam, and industrial process markets. In December 2012, Bill Higgins stepped down as the company’s<br />
President and CEO to pursue other interests. Wayne Robbins, President of the Flow Technologies group was<br />
appointed acting President and CEO and the board has initiated a search process to identify a permanent<br />
President and CEO. In spite of the change in leadership, we believe the company is well positioned for future<br />
earnings growth driven by higher investments in the energy market, the increase in production of commercial<br />
aircraft, and more infrastructure investments in developed and developing countries.<br />
Diageo plc (3.3%) (DEO LN - $116.58 - NYSE) is the leading global producer of alcoholic beverages, with<br />
brands including Smirnoff, Johnny Walker, Ketel One, Captain Morgan, Crown Royal, J&B, Baileys, Tanqueray,<br />
and Guinness. The company has a balanced geographic presence in both mature and emerging markets, and<br />
benefits from the trend of consumers around the world trading up to premium branded products. In 2011 and<br />
2012, Diageo made several acquisitions that enhanced its presence in emerging markets: Mey Icki, the leading<br />
spirits company in Turkey; Shui Jing Fang, a leading Chinese baiju producer, Ypioca, the leading cachaca<br />
producer in Brazil; and an increased stake in Halico, the leading domestic spirits producer in Vietnam. Diageo<br />
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