Gabelli Value Plus+ says that, over the six months ended 30 September 2016, a moderate rise of 6.4% in the S&P 500 Index was boosted by the pound’s weakness to a 18.1% return in sterling terms. The NAV total return, which was 17.2% during the period, slightly lagged this index. The share price total return during the period was significantly better at 25.1%, as the discount to NAV narrowed. A dividend of 0.3 pence per share was paid in July 2016 in respect of the financial period ended 31 March 2016. As stated in the Annual Report, dividends are expected to be declared annually so no dividend will be paid at the interim stage. Revenue earnings during the current period were 0.40 pence per share (2015: 0.03 pence).
The results statement gives the manager’s views on five stocks held within the portfolio. We have reproduced that here.
“Bank of New York Mellon Corp. (BK – $39.88 – NYSE) is a global leader in providing financial services to institutions and individuals. The company operates in more than one hundred markets worldwide and strives to be the global provider of choice for investment management and investment services. As of 30 June 2016, the firm had $29.5 trillion in assets under custody and $1.7 trillion in assets under management. We expect BK to benefit from rising global incomes and the cross border movement of financial transactions. BK is also well positioned to grow earnings in a rising interest rate environment, given its large customer cash deposits and significant loan book.
Federal Mogul Corp. (FDML – $9.61 – NASDAQ), based in Southfield, Michigan, is a leading global supplier of components to automotive and trucking original equipment manufacturers as well as to the large global automotive aftermarket. Earlier this year, Icahn Enterprises (IEP), which owns roughly 80% of Federal Mogul’s 170 million outstanding shares, made an offer of $7 per share for the 19 million shares it does not already own. The bid was subsequently raised to $8 per share after shares traded significantly higher following the announcement. In September, FDML announced that it had reached an agreement with IEP for IEP to purchase FDML for $9.25 per share. The tender offer is subject to shareholder approval. At $9.25 per share, the offer still falls below our estimate of full value for FDML shares.
Herc Holdings Inc. (HRI – $33.70 – NYSE), based in Bonita Springs, Florida, is the third largest equipment rental company in the United States, after United Rentals (URI) and Sunbelt Rentals (owned by Ashtead). HRI was spun out of former parent company Hertz on 30 June 2016. Underemphasized as part of a significantly larger car rental company, as a standalone entity HRI now has the opportunity to improve profitability to levels more commensurate with peers. Ultimately, we view HRI as an attractive acquisition candidate.
National Fuel Gas Co. (NFG – $54.07 – NYSE) is a diversified natural gas company. NFG owns a regulated gas utility serving the region around Buffalo, New York, gas pipelines that move gas between the Midwest and Canada and from the Marcellus Shale region to the Northeast, gathering and processing systems, and an oil and gas exploration and production business. NFG’s regulated utility and pipeline businesses, as well as its California oil production business, provide stable earnings and cash flows to support the dividend, while the natural gas production business offers significant upside potential. While natural gas prices have been depressed over the past few years, NFG’s ownership of 800,000 net acres in Pennsylvania, including 780,000 acres in the Marcellus Shale, holds enormous natural gas reserve potential and the company has proven to be among the lower cost producers. We continue to expect above average long term earnings and cash flow growth from improving gas prices, growing gas production, and strategically located pipeline expansion. The company has increased its dividend for forty-six consecutive years. In addition, NFG is considering corporate restructuring alternatives, including a master limited partnership of its midstream assets.
Ryman Hospitality Properties Inc. (RHP – $48.16 – NYSE) is a Nashville, Tennessee based REIT that owns convention hotels in Nashville, Tennessee; Orlando, Florida; Dallas, Texas; and Washington, D.C. Other assets include the iconic Opryland, the famous Ryman Auditorium, the General Jackson Showboat, and Nashville based radio station WSM-AM. With property manager Marriott’s operational issues resolved, the team is focused on taking advantage of strong convention bookings trends, seeking to drive margin expansion by increasing occupancy and room rates. Finally, as the leading country music entertainment brand, the potential monetization and spin-off of the entertainment assets, including the Grand Ole Opry, also remains a significant catalyst for RHP shares.”
The portfolio also contains holdings in a number of companies where a takeover bid has been announced – Gabelli seek these out and invest in anticipation that the terms of the deal will be improved in their favour. Pending deals include the Verizon Communications bid for Fleetmatics Group, Microsoft’s bid for LinkedIn, Danone’s bid for Whitewave Foods, Duke Energy’s bid for Piedmont Natural Gas and Great Plains Energy’s bid for Westar Energy.
GVP : Gabelli Value Plus+ discount narrows