Is GATX Corporation (GATX) the best stock to buy from Mario Gabelli’s portfolio?

We recently published a list Mario Gabelli Stock Portfolio: 10 Best Stocks to BuyIn this article, we’ll take a look at where GATX Corporation (NYSE:GATX) stacks up against other Mario Gabelli-approved stocks.

GAMCO Investors, Inc., formerly Gabelli Asset Management Company, is a well-known American company headquartered in Rye, New York. The company specializes in providing investment advisory and brokerage services to 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 compensation over the past few years.

Experienced investor Mario Gabelli has made millions of dollars betting on the unloved. He likes to invest in companies that are NOT being watched or analyzed by Wall Street analysts. If a company is not part of an index, it becomes even more attractive.

The hedge fund manager remains committed to active value investing. His investment philosophy of focusing on value stocks over growth stocks prevailed even when passive index funds and the Nasdaq “FAANG” dominated the market during the Fed’s loose interest rate policy. His investment secret is simple – “Find a good business with good management, buy the stock at a reasonable price, and then hold it for the long term.”

According to Insider Monkey’s Q2 2024 database, industrial goods make up about 21.7% of the total investment portfolio.

What’s next for the US stock market, according to Gabelli Funds

Gabelli Funds believes the U.S. presidential election is likely to increase market volatility in the second half of 2024. At the same time, long-awaited rate cuts in September could increase rotation in areas of the market that lagged during the year. The investment management firm sees increased volatility in the election. That said, economic weakness and volatility are expected to be offset by fundamental rotation and lower rates.

Gabelli seems optimistic about the broader U.S. economy. He believes companies have healthy cash flows and gross margins are improving. The only thing that could affect U.S. stocks is geopolitical risk.

Gabelli recently appeared on the prestigious Barron’s Roundtable. He believes that global GDP, as measured by the International Monetary Fund, is expected to be ~$115 trillion in 2025. The US is 26% and China 17%. Consumer spending is ~70% of the US economy and industrial spending ~12%.

Mario Gabelli mentioned that the US Federal Reserve is focused on the four Rs. The first is to keep “interest rates high for longer.” The second R is the “continued outflow of the central bank’s balance sheet,” which is currently happening at a rate of $60 billion per month, up from ~$95 billion in early 2024. Next, the US Federal Reserve continues its efforts to “contain aggregate demand.” However, higher government spending continues to offset these efforts. Finally, the Chairman continues to “speech rhetoric about lower inflation.”

Mergers and acquisitions (M&A) and other financial engineering strategies are expected to increase significantly for a number of reasons. Gabelli believes that several private equity funds are approaching the end of their 10-year life cycles and limited partners (LPs) are in need of liquidity. Therefore, this situation will lead to higher sales. Mario Gabelli expects M&A to gain momentum globally in H2 2024.

While the S&P 500 is up more than 15% year-over-year, seasoned investors believe stocks could grow around 8% annually in the coming years, significantly higher than the returns from fixed-income securities.

Mario Gabelli is optimistic about these sectors

Mario Gabelli seems to be increasingly interested in sports franchises. This is because sports will remain the focal point of linear TV and streaming. Rumors have it that media companies are paying big bucks for broadcast and streaming rights.

Moving on, the seasoned hedge fund manager believes that AI is a great technology, just like other market experts.

Gabelli’s next choice is natural gas. He believes there is huge potential for price increases over the next few years, as some producers shut in wells or produce less, and demand continues to grow relative to power generators and liquefied natural gas exports.

At Insider Monkey, we’re fascinated by the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

GATX Corporation (NYSE:GATX)

Value of GAMCO investor shares: USD 183.8 million

Percentage of GAMCO investors’ 13F portfolio: 1.99%

Number of hedge fund holders: 12

GATX Corporation (NYSE:GATX) is a railcar leasing and maintenance services provider. It operates in 4 business segments: Rail North America, International Rail, and Portfolio Management.

The company reported Q2 2024 results, with revenue coming in at $386.7 million, compared to analyst estimates of $385.5 million. Earnings per share (non-GAAP) came in at $1.43. This compares to analyst expectations of $1.78.

The company’s stock is currently trading at ~19.2x forward earnings, which is a discount to the sector average of ~24.4x. Higher demand for railcar leasing across multiple industries, such as refining and petroleum, chemicals, plastics, and food and agriculture, should continue to act as a key growth driver for GATX Corporation (NYSE:GATX). By capitalizing on this demand trend, the company should be able to expand its customer base and increase its market share.

GATX Corporation (NYSE:GATX) continues to deliver new railcars under an existing supply agreement. It also acquired more than 600 railcars in the secondary and spot markets in Q2 2024.

Investment in engines is expected to remain high throughout the year, and demand for spare engines for railcars and aircraft is expected to remain stable in the future.

Susquehanna raised their target price on GATX Corporation (NYSE:GATX) from $120.00 to $122.00, giving the stock a “Neutral” rating for June 24.^t April. Twelve hedge funds reported holding shares in GATX Corporation (NYSE:GATX), according to Insider Monkey’s Q2 2024 data.

Total GATX takes 3rd place on our list of the best stocks to buy according to Mario Gabelli. While we recognize the potential of GATX as an investment, our conviction is based on the belief that some deeply undervalued AI stocks have more promise to deliver higher returns, and do so in a shorter time frame. If you are looking for deeply undervalued AI stocks that are more promising than GATX but are trading at less than 5 times earnings, check out our report on cheapest AI action.

READ MORE: $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley AND Jim Cramer says NVIDIA has ‘become a wasteland’.

Disclosure: None. This article was originally published on Insider Monkey.