Mario Gabelli’s 2022 Portfolio: 10 Tech Stock Picks

view original post

In this article, we discuss 10 tech stock picks of Mario Gabelli. If you want to skip our discussion on Gabelli’s history and investment philosophy, go directly to Mario Gabelli’s 2022 Portfolio: 5 Tech Stock Picks.

Mario Gabelli is a renowned investor known for founding and running GAMCO Investors as Chairman and CEO since 1977. Gabelli was born in 1942 in Bronx, New York, to an Italian immigrant family. Stock picking came to him early as he started investing at the age of 13. He was a first-generation college graduate in his family from Fordham University’s College of Business Administration in 1965 as a summa cum laude. After completing his graduation, Gabelli joined Loeb, Rhoades, & Co. as a security analyst and covered the farm equipment industry and auto parts conglomerates. Later he became responsible for covering the media and broadcasting industry. He continued his studies further and received an MBA from Columbia University.

Gabelli has also received honorary doctorates from Fordham University and Roger Williams University. Presently, he is serving as a member of the Board of numerous colleges such as Boston College, Columbia University Graduate School of Business, and Roger Williams University. He is a big donor and supporter of higher education. According to Forbes, Gabelli’s net worth stands at around $1.8 billion as of June 10.

GAMCO Investors’ investment strategy focuses on bottom-up, structural investing. The firm’s information advantage is built on thorough corporate and sector research, as well as decades of industry analysis. The hedge fund claims to have portfolios with a high active share which means the fund looks for opportunities that most investors ignore. Client-directed customized individual accounts, SMAs, and open/closed-end mutual funds are among the services offered by the firm. As of Q1 2022, the portfolio value of Gabelli’s hedge fund stood at $11.08 billion and included popular stocks such as Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN).

Our Methodology

We have picked these tech stocks from the Q1 2022 portfolio of GAMCO Investors. Business fundamentals, analyst ratings, and growth prospects have been analyzed for each stock. Insider Monkey tracked over 900 elite funds to determine how popular these stocks were among the hedge funds as of Q1 2022.

Mario Gabelli’s 2022 Portfolio: 10 Tech Stock Picks

10. Sony Group Corporation (NYSE:SONY)

Number of Hedge Fund Holders: 26

Mario Gabelli’s Stake Value: $185,463,000

Percentage of Gabelli’s Portfolio: 1.66%

Sony Group Corporation (NYSE:SONY) is a Tokyo, Japan-based conglomerate involved in the manufacturing of consumer electronics and video game consoles. The company is also a video game publisher. Sony Group Corporation (NYSE:SONY) has significant clout in the entertainment industry through Sony Entertainment Inc. The company is the biggest music publisher and is the third biggest movie studio in the world.

In a note issued to investors on May 18, Martin Yang at Oppenheimer gave Sony Group Corporation (NYSE:SONY) a target price of $2125 and maintained an Outperform rating on the stock after the company organized its annual Strategic Meeting. During the meeting, Sony Group Corporation (NYSE:SONY) maintained its focus on obtaining direct-to-consumer services and sensing technologies. The analyst also added that the tech company is looking at metaverse and mobility as the two growth areas in the long term. The management’s tone was more investor-friendly as it revealed that share buyback was part of the strategic plan. It must be highlighted that this message was not included in the annual strategic meeting for 2021.

In its Q1 2022 investor letter, Sony Group Corporation (NYSE:SONY) was mentioned by Aristotle Capital Management. Here’s what the investment management firm said:

Sony, maker of the PlayStation videogame console, was a leading detractor for the quarter. After a strong year in 2021, a shortfall in PlayStation 5 sales due to continued semiconductor shortages has dampened new console unit sales. Although there are likely to be continued limitations on the supply of components in the short term, consumer demand remains strong, and upcoming releases of major titles such as Horizon Forbidden West and Gran Turismo 7 are likely to further enhance demand. While Sony continues to manage supply-chain headwinds, the company has also again demonstrated its ability to build on the fundamental strength of its business across various segments. During the quarter, Sony acquired Bungie, a U.S.-based videogame developer known for the Destiny franchise and live game services; completed its initial equity investment in Japan Advanced Semiconductor Manufacturing, a foundry service subsidiary of Taiwan Semiconductor Manufacturing Company (TSMC); and acquired Brazilian music label Som Livre. Lastly, Sony announced a partnership with Honda Motor (NYSE:HMC) where the two companies expect to combine Honda’s expertise in manufacturing vehicles with Sony’s proficiency in imaging, sensing, telecommunication and network technologies to develop and commercialize electric vehicles. We feel these strategic actions demonstrate Sony’s ability to continue to improve on its market positions across its business segments with a long-term, forward-looking approach.”

Sony Group Corporation (NYSE:SONY) was held by 26 hedge funds at the end of Q1 2022.

9. PayPal Holdings, Inc. (NASDAQ:PYPL)

Number of Hedge Fund Holders: 100

Mario Gabelli’s Stake Value: $5,778,000

Percentage of Gabelli’s Portfolio: 0.05%

PayPal Holdings, Inc. (NASDAQ:PYPL) is a San Jose, California-based company with its own digital and mobile payment processing platform that aids in money transfers around the globe and is an alternative to traditional financial instruments like checks and money orders. The fintech company has 325 million active account holders as of June 2022.

Dan Dolev at Mizuho thinks that there is a strong demand for the tap-to-pay services on PayPal Holdings, Inc.’s (NASDAQ:PYPL) Venmo to work on Apple Pay. The analyst added that if Venmo is allowed access to Apple’s NFC, it could experience a 10% increase in the payment volume and a 15% to 20% rise in sales due to Venmo’s high in-store take rates and a balance-driven funding mix. The prospects of a potential partnership are looking bright as Apple partnered with Square to enable tap-to-pay services. In the research note issued on June 7, the analyst gave PayPal Holdings, Inc. (NASDAQ:PYPL) stock a Buy rating with a price target of $120.

Here’s what Polen Capital said about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q1 2022 investor letter:

“After reporting third-quarter 2021 results, we spoke to PayPal Holdings, Inc. (NASDAQ:PYPL)’s CFO to discuss the guidance changes, the strategy going forward, and the rumors surrounding the Pinterest deal. It was a constructive conversation that increased our confidence in management’s direction for the business and in its ability to exploit its competitive advantages within the exciting area of digital payments. We increased our position size at the time, bringing it to an average weight. Our confidence in management declined, however, following their fourth-quarter results, which included a change in business strategy, disappointing 2022 guidance, and the removal of significant elements of their long- term guidance provided less than a year earlier and seemingly confirmed throughout 2021. Ultimately, we decided to exit our position completely based on these factors. While we think the backdrop for payments—specifically digital and mobile payments—is attractive and would have expected the tailwinds from COVID-19 to play very much to PayPal Holdings, Inc. (NASDAQ:PYPL)’s favor, management has been less successful than we would have expected. In short, we think execution has been poor, and we have lost confidence in management.”

As of Q1 2022, PayPal Holdings, Inc. (NASDAQ:PYPL) was held by 100 hedge funds.

8. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 160

Mario Gabelli’s Stake Value: $63,624,000

Percentage of Gabelli’s Portfolio: 0.57%

Alphabet Inc. (NASDAQ:GOOG) is a Mountain View, California-based technology conglomerate that is the parent of the search engine Google and is involved in various other fields like artificial intelligence, autonomous cars, cloud computing, robotics, and software.

On June 1, Brian Nowak at Morgan Stanley gave Alphabet Inc. (NASDAQ:GOOG) a target price of $3,000 and an Overweight rating. The analyst highlighted that the probability of a recession in the US was 5% at the start of the year, and now it has increased to 35%. As a result, Nowak reduced the ad revenue growth by 13% and 16% YoY in 2022 and 2023. Meanwhile, the analyst has cut the e-commerce growth rate in 2022 and 2023 to 8% and 10%, respectively.

Farrer Wealth Advisors shared its insights on Alphabet Inc. (NASDAQ:GOOG) in its Q1 2022 investor letter. Here’s what the firm said:

Alphabet: We won’t waste much time trying to explain to our clients why Alphabet Inc. (NASDAQ:GOOG) is such a phenomenal business, we believe that is quite self-evident. The better explanation is why we never bought Alphabet before. The reason was a personal bias we held based on three beliefs (which we now believe to be incorrect)

Growth in YouTube would stall as the increased ad-load would turn-off viewers (the double ad-load at the beginning of videos for example). Consumers will focus on discovery rather than search to purchase new items. For example – using Instagram/TikTok to decide what new clothes to buy instead of ‘googling’ for clothes. Other Bets: In general, we felt that capital spent on “Other Bets” has been a bit wasteful with the segment earning just around $3.1bn in revenue versus nearly $21bn in operating losses over the last five years…” (Click here to see the full text)

Overall, 160 hedge funds held a stake in Alphabet Inc. (NASDAQ:GOOG) as of Q1 2022.

7. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 200

Mario Gabelli’s Stake Value: $10,373,000

Percentage of Gabelli’s Portfolio: 0.09%

Meta Platforms, Inc. (NASDAQ:META) is a Menlo Park, California-based diversified technology company that is the parent of social media and messaging applications like Facebook, Instagram, and WhatsApp. Meanwhile, the company is also working on the next generation of social connections through the metaverse.

On June 9, Eric Sheridan at Goldman Sachs reiterated his Buy rating on Meta Platforms, Inc. (NASDAQ:META) stock with a price target of $290. The analyst revised the revenue and EBITDA estimates to take a more conservative approach to the outlook of the digital advertisement sector. Furthermore, the company is still recovering from the impact of privacy changes made by Apple. The battle for new users is intensifying due to the high level of competition in the form of TikTok and other social media platforms. Meta Platforms, Inc.’s (NASDAQ:META) COO, Sherly Sandberg, also resigned from her position earlier this month. However, despite all these near-term challenges, Sheridan is optimistic about the long-term outlook of the company.

Here’s what Polen Capital said about Meta Platforms, Inc. (NASDAQ:META) in its Q1 2022 investor letter:

“What Would You Pay for the World’s Largest Communication and Entertainment Platform? How Does 5x Earnings Sound?

Meta Platforms also had solid, if not slightly lower-than-expected revenue growth last quarter but guided to a significant slowdown in revenue growth for 1Q 2022. Meta called out TikTok, a competitor for people’s time and attention, seeming to imply it as one of the factors causing the growth slowdown. This appeared to stoke fears that the company’s user engagement and value proposition was eroding for its users and marketers and subsequently would lead to lower advertising revenue growth and market share loss.

We do not doubt that TikTok is taking time and attention away from many forms of digital media, core Facebook and Instagram included. That said, we believe TikTok has mostly expanded the pie. Meta’s user engagement has been stable, even on the very mature core Facebook app. Our research shows that most of the growth headwinds are more likely attributable to a combination of factors. These factors include a preference for short-form video while spending time on the platform (Facebook and Instagram Reels), which is not monetized effectively yet, a COVID-19 pull-forward impact like Netflix, and changes to Apple’s (AAPL) iOS operating system.

More specifically, the changes to iOS make it more difficult for Facebook and Instagram to measure certain types of ads accurately, at least for now. Meta has quantified that the Apple impact as roughly a $10 billion revenue headwind for fiscal 2022, or approximately 7% of total revenue. This is a bit larger than we would have expected, and it is taking longer than expected for Facebook to develop with their own measurement tools. But, excluding the Apple impact alone, Facebook would be growing close to what we would have expected in a more normal environment. Although it could take some time to alleviate, we believe the Apple impact will prove temporary, and we continue to monitor engagement trends on Facebook and Instagram from competitors like TikTok…” (Click here to see the full text)

Meta Platforms, Inc. (NASDAQ:META) was held by 200 hedge funds as of Q1 2022.

6. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 80

Mario Gabelli’s Stake Value: $1,530,000

Percentage of Gabelli’s Portfolio: 0.01%

Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based electric vehicle manufacturer.

On June 9, Patrick Hummel at UBS upgraded Tesla, Inc. (NASDAQ:TSLA) from a Neutral to a Buy rating with a price target of $1,100. The analyst highlighted that although the stock has been down over 35% since the start of 2022, the outlook of Tesla, Inc. (NASDAQ:TSLA) is very positive. The biggest automobile company in the world in terms of market capitalization has a significant amount of backlog, and two new gigafactories are increasing their production level. Furthermore, Tesla, Inc. (NASDAQ:TSLA) has a competitive advantage in various aspects of the supply chain. Due to the COVID-19-related lockdowns in China, Hummel cut the 2022 EPS estimates by 12%. However, the analyst increased the EPS estimates for the next three years by 40% and is expecting an EPS of $28 by 2025.

Here’s what Fiduciary Management said about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:

“Remarkably, the Nasdaq-100 and Russell 2000 indices are up 6.25% and 3.90% through 3/31/22, respectively, since the war started. Tesla, Inc. (NASDAQ:TSLA) went up 57% from its low on February 24 ($700) to the close on March 29th ($1099), which equates to an advance of $413 billion. To put that in perspective, the 24-trading day gain in Tesla was greater than the entire market value of Walmart, Inc.! Tesla trades for 120 times estimated 2022 GAAP2 earnings, compared to Walmart’s (NYSE:WMT) 21.8 multiple (1/2023 fiscal year).”

As of Q1 2022, 80 hedge funds held a stake in Tesla, Inc. (NASDAQ:TSLA).

In addition to Tesla, Inc. (NASDAQ:TSLA), stocks such as Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN) are also a part of Gabelli’s 2022 portfolio.

Click to continue reading and see Mario Gabelli’s 2022 Portfolio: 5 Tech Stock Picks.

Suggested Articles:

Disclose. None. Mario Gabelli’s 2022 Portfolio: 10 Tech Stock Picks is originally published on Insider Monkey.