INVESTMENT SCORECARD
The largest contributors to Q2 returns were generally cash generative firms with pricing power, such as data analytics provider S&P Global (1.5% of net assets as of June 30, 2023, +17%), waste services leader Republic Services (1.8%, +14%), and niche manufacturers AMETEK (3.0%, +12%) and Crane Co. (0.2%, +25%). Crane NXT (0.2%, +41%), a payments and currency technology company spun-off from Crane Co. in Q2, was well especially received. Berkshire Hathaway (2.0%, +11%) contributed largely due to the performance of its own largest holding, Apple (0.1%, +18%). Media companies Paramount Global (0.5%, -28%) and Warner Bros. Discovery (0.6%, -17%) gave back some of their Q1 gains as worries about the pace of subscriber cord cutting and the state of the advertising market grew. Gold miners Newmont (1.1%, -12%) and Royal Gold (0.8%, -11%) detracted from performance as the price of gold followed inflation expectations down; Newmont’s planned takeover of peer Newcrest also pressured the stock.
Many of the same dynamics above held throughout the first half of the year with Republic (1.7%, +20%), AMETEK (3.3%, +16%), and S&P Global (1.4%, +20%) among the top year-to-date contributors. Sony Corp. (2.4%, +18%) also enjoyed a strong 1H owing to strong gaming performance and optimism around semiconductor makers. Meta Platforms (0.3%, +138%) was a notable contributor. YTD detractors included agriculture-oriented firms Deere & Co. (3.0%, -5%), CNH Industrial (1.2%,-8%), and Archer-Daniels-Midland (0.5%, -18%). CVS Health (0.5%, -25%) suffered with much of the healthcare sector.
DISH Corp. (0.1%,-53%) struggled with a heavy debt load amidst a need for additional capital to complete its construction of a fourth national wireless network.
The Asset Fund is subject to the risk that the portfolio securities’ PMV may never be realized by the market, or that the portfolio securities’ prices decline.
LET’S TALK STOCKS
When discussing specifiic stocks in the portfolios of the Funds, favorable earnings prospects do not necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop over time. Individual securities mentioned are not necessarily representative of a Fund’s entire portfolio. For the holdings discussed, the percentage of the Fund’s net assets and their share prices stated in U.S. dollar equivalent terms are presented as of June 30, 2023.
Cavco Industries (CVCO, Financial) (0.4% of net assets as of June 30, 2023) (CVCO – $210.25 – NASDAQ), based in Phoenix, Arizona, is one of the largest manufactured home producers in the U.S., with fiscal 2023 (March 31 fiscal year end) revenue of $2.1 billion and net income of $241 million ($26.65 per share). Fiscal 2023 was Cavco’s thirteenth consecutive year of revenue and earnings growth. In January, Cavco closed the acquisition of Solitaire Homes, an Oklahoma based vertically integrated manufactured home producer with four plants and 22 retail locations. Despite the recent industry slowdown caused mostly by higher interest rates, Cavco is well positioned to benefit from healthy long term for affordable housing in the U.S. with 31 production lines, 64 company owned retail stores and mortgage and insurance subsidiaries. Cavco also has a strong balance sheet that includes $271 million of cash, and no parent company debt.
Crane Co. (CR, Financial) (1.0%) (CR – $56.44 – NYSE), based in Stamford, Connecticut, is a diversified manufacturer of highly engineered industrial products comprised of four business segments: Aerospace & Electronics, Process Flow Technologies, Payments and Merchandising Technologies, and Engineered Materials with over 11,000 employees across 34 countries. In April 2023, the company separated into two independent companies, in which Payment and Merchandising Technologies business became “Crane NXT” and the Aerospace & Electronics and Process Flow Technologies business retained the Crane Co. name.
HCA Healthcare (HCA, Financial) (0.4%) (HCA – $303.48 – NYSE) is the largest healthcare system in the United States, with 182 hospitals and over 2300 total sites of care. The company’s best-in-class management team has successfully guided the company through a challenging three year period that included the COVID-19 pandemic, labor shortages, and inflationary pressures. HCA’s operations are now returning to normal and the company is starting to address a significant backlog of deferred care. While the company invests heavily in new facilities and organic growth, HCA generates significant additional cash, flow which it returns to shareholders via share buybacks and a growing dividend.
S&P Global (SPGI, Financial) (1.5%) (SPGI – $400.89 – NYSE) is a financial information conglomerate with the worlds largest credit ratings agency (S&P Ratings), largest index licensing franchise (S&P Indexes), largest commodity pricing engine (Platts), and a leader in financial data delivery (S&P Capital IQ), and automotive reports (CARFAX). The company merged with IHS Markit in February 2022, combining two of the largest financial data companies. The company’s wide variety of unique and proprietary datasets provide mission critical information to its customers, and the ability to re-package and re-use data allows the company to generate high returns on capital. S&P’s large scale creates high barrier to entry for data collection, while also providing the largest distribution network.
Returns represent past performance and do not guarantee future results. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end.
