Gabelli's Heart Is Where The Home Isby
How much higher? That, says money manager Mario Gabelli, isn't the issue. The pressing question: "Where to find bargains in this roaring bull market." As keeper of $10 billion in investors' assets, Gabelli Asset Management and its group of mutual funds hold at least a 5% stake in more than 100 companies. So it's essential, says Gabelli, to flush out "values that have been unjustifiably battered or ignored, or are simply undiscovered." He thinks the next batch of winners will be in the economy's depressed sectors.
With the economy on the go--and housing construction stronger than expected--Gabelli thinks that makers of housewares, furnishings, and building materials will shine.
Gabelli's picks: General Housewares (GHW), a Big Board-listed maker of cutlery, pots and pans, and other kitchenware; Nortek (NTK), which produces plumbing, air-conditioning, and music-intercom systems; and Ampco-Pittsburgh (AP), a manufacturer of heating coils, pumps, and rolled metal sheets used in aluminum siding and appliances. "Not exactly sexy plays, but they're companies that do exceedingly well in an improving economy," says Gabelli.
General Housewares has added allure: It's a rumored buyout target, says a New York investment banker who believes a conglomerate has taken a 4.9% stake. The banker says this group is known for acquiring big positions in companies--and it often leads to a merger. He figures General Housewares is worth 20 a share in a takeover.
Gabelli, whose group owns 17% of General Housewares, says he doesn't know of a buyout. But he calls it very attractive at its current price of 91/2.
So is Nortek, he says, of which Gabelli holds 15%. About 60% of its 1995 sales of $776 million came from the remodeling and renovation market--and the rest from building new houses. Nortek, he notes, has engineered a turnaround: After several years of losses, Nortek made a profit in 1994. It earned $1.19 a share last year and should make $1.50 this year, estimates Gabelli. In 1997, look for $1.70.
Ampco-Pittsburgh "is another downtrodden stock that we think is underpriced," says Gabelli, whose funds own 19% of the stock. The company has a strong balance sheet: almost no debt and a cash hoard of $3 a share. Ampco, which made 94 cents a share last year, is expected to earn only 90 cents this year but should make $1.75 in 1997.