Gabelli & Friends- You Spin(off) Me (Barron's) Round(Table)

Active management may be under attack, but don’t tell that to Barron’s. Every year the venerable paper hosts an investor roundtable featuring some of the industry’s leading voices and largest active asset managers. The day long event offers a chance to hear their thoughts on a wide variety of topics including the economy and pressing global issues. Readers are most interested in their best investment ideas for 2019 though, offering mere mortals a chance to tag along with some heavyweights (if that’s your thing).

Mario Gabelli, chairman of GAMCO Investors (GBL), is a Roundtable veteran and his picks seemingly always feature a number of spinoff related names. The year 2019 is certainly no exception and his picks included four(!) spinoff related names. Let’s take a closer look at what he is excited about and for reference, click here for his 2017 picks:

Liberty Braves Group (BATRA, BATRK) – a John Malone company, the name offers plebs (like me) a chance to own a stake in a baseball team, the Atlanta Braves. Mr. Gabelli thinks sports betting will be a positive for the industry, but most interestingly, he highlighted changing NFL rules allowing the potential for the company to acquire or be acquired by the Atlanta Falcons. In other words, he is expecting a deal.
New Fox spinoff – you may have heard that Disney (DIS) is in the process of acquiring Rupert Murdoch’s 21st Century Fox (FOXA). As part of the transaction, Disney will spin off ‘New Fox’ whose assets will include TV stations (including, but not limited to Fox, Fox News and Fox Business), a stake in Roku and some other assets. Mr. Gabelli thinks the new company is undervalued and will benefit from the upcoming 2020 election.
Herc Holdings (HRI) – this was on his list in 2017 and the equipment rental company was a 2016 spinoff from Hertz Global Holdings (HTZ). He isn’t concerned about the company’s heavy debt load and thinks the management team is superb and will deliver excellent results.
Energizer Holdings (ENR) – this was on his list last year and the company spun off Edgewell Personal Care (EPC) back in 2015. He remains positive on the management team’s ability to integrate recent acquisitions and deliver ‘enormous EBITDA growth’. He also highlighted the company’s growing hearing aid battery segment.

Mr. Gabelli wasn’t the only one looking at spinoffs though and a few others were featured throughout the day. Delphi Management’s Scott Black has AbbVie (ABBV) on his list. The company was a 2013 spinoff from Abbott Laboratories (ABT) and is best known for its blockbuster drug Humira. Mr. Black is positive on its future internal development which was Abbvie’s bet when it became independent.

Lastly, Epoch Investment Partners’ Bill Priest recommended DowDupont (DWDP). After merging in 2017, the mega conglomerate is currently in the process of carving itself up into three distinct companies this year. His sum of the parts analysis for the company is in the ‘low $70’s’ and thinks the breakup will deliver value ‘independent of the market’s direction’.

Always good to see spinoffs on the list and perhaps these types of special situations can help them deliver some alpha. We will check in on their picks when Barron’s does its mid-year review in June.

Disclosure: Author is long shares of Liberty Braves and of Disney.