Gene Marcial's Inside Wall StreetEvery quarter, stock-pickers at investment firm Gabelli & Co. come up with five value stocks that are trading way below their intrinsic worth. It's a nervy and challenging task, especially because the Gabelli analysts identify the catalysts they believe would catapult the shares to their utmost potential. And each quarter, their choices deliver enviable results.

The Gabelli team has been picking what it calls its "Focus Five" stocks since Jan. 31, 2006, and within that time span their calls have advanced a mighty 168.6%, outdistancing by a wide margin the Standard & Poor's 500-stock index, which lost 3.7% in that period. During the previous quarter (Aug. 1 to Oct. 29), the Focus Five also outperformed the S&P 500, with a gain of 13.53% vs. S&P's 7.41% gain.

Daniel M. Miller, who heads the Gabelli Focus Five team, notes that each chosen stock, for the most part, outperformed the S&P quite convincingly. One such super-performer was Take Two Interactive (TTWO), which advanced 84% in the first quarter of 2008, beating the S&P's 4% gain. And Oceaneering International (OII), which jumped 44% in the second quarter of 2006, handily outperformed the S&P, which declined 5.84% during that quarter.

Here are the latest Focus Five hopefuls for the final quarter of 2010:

Madison Square Garden (MSG), spun off in February 2010 by Cablevision (CVC). It controls leading sports and entertainment assets, including the New York Knicks of the National Basketball Association, the New York Rangers of the National Hockey League and a number of cable networks and real estate properties.

Clear Channel Outdoor Holdings (CCO), the leading global outdoor advertising company. It operates in several top markets in the U.S. and in 20 other countries.

National Fuel Gas (
NFG), an integrated energy company with six operating segments. Its businesses include utility operations, natural-gas transmission pipelines that provide interstate gas transportation and storage services from Pennsylvania to the New York-Canadian border, and exploration and production, primarily in California, Appalachia and the Gulf of Mexico.

NII Holdings (
NIHD), a Reston, Va.-based leading provider of digital wireless services. It offers products and services for individuals and businesses in Argentina, Brazil, Chile, Mexico and Peru.

Penske Automotive Group (PAG), which operates dealerships that sell new and used vehicles and aftermarket auto products. It operates mostly in the U.S. and Britain.

Miller believes that Madison Square Garden, currently trading at $20 a share, is priced way below its real worth because it owns some of the most valuable assets in New York City. Apart from its legendary Madison Square Garden sports and entertainment arena, the company also owns the world-famous Radio City Music Hall, the Beacon Theater and Chicago Theater. The now-publicly traded MSG, says Miller, is fully focused on enhancing shareholder value in an effort to attract more investors. Miller argues that MSG's sports networks alone are worth the current price of the stock and that investors are paying practically nothing for the rest of company's assets. Miller puts the private market value of MSG at $50 a share.

Clear Channel Outdoor Holdings is also way undervalued, figures Miller, given the "improving cyclical and long-term dynamics in outdoor advertising." It's trading at $11 a share, or about 8.3 times its projected earnings before interest, taxes, depreciation and amortization. The company operates over 834,000 advertising displays worldwide, including billboards, displays in buses and transit stations, as well as displays in shopping malls. It's possible, says Miller, that Clear Channel could initiate a dividend. Speculation is that a potential one-time payment of $500 million, or $1.41 a share, may be paid out to shareholders. Also a positive is the recent approval by the company's board to repurchase $100 million worth of stock. He puts the stock's private market value at $19.

National Fuel Gas, based in Buffalo, N.Y., has engaged an investment adviser to explore potential joint-venture opportunities and evaluate other alternatives for enhancing shareholder value, according to Miller. He figures the stock, currently trading at $56 a share, has an intrinsic private market value of $79 a share.

NII Holdings
offers a fully integrated wireless communications tool with digital cellular voice and data services, plus Internet access. It posted operating revenues of $1.4 billion in the third quarter of 2010 and consolidated net income of $136 million, or 81 cents a share. That's up from a year ago, when NII reported revenues of $1.1 billion and earnings of 44 cents a share. Speculation is NII may form a partnership with Grupo Televisa. The company is also aiming to gain more spectrum in Brazil, which should help NII enhance its services and expand its addressable markets. Currently trading at $41 a share, the Gabelli analysts put the stock's 2011 intrinsic value at $66 a share.

Penske Auto Group, the second-largest U.S. automotive retailer by revenue, is expected to benefit from a projected robust used-vehicle market next year. Compared with AutoNation (AN), the industry's market leader, Penske is cheap at $13 a share, or 12 times projected 2010 earnings of $1.10 a share, and 10 times estimated 2011 forecast of $1.30 a share, Miller figures. He estimates the intrinsic value of Penske's stock at $22 a share.

The betting is that the Gabelli Focus Five stocks will perform as well, if not better, than their past picks. And if they do, it should serve as a reminder to investors that astute and dedicated stock-picking is still the most reliable way to consistently beat the market.


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G2 Services, Ltd

Hard to argue with the dudes track record. None of these stocks have been on my watch list. Will add them to the list. As long as the Fed is pooring money into the system this will be a good market. I don't agree with that approach, but they might be able to fool joe six pack into buying again. Anyway, don't fight the Fed. I like SLV, VALE, DNN,SINA.

November 08 2010 at 2:56 PM Report abuse rate up rate down Reply
cvdunbar

the top pick will be warter soon, there already a scam in america to crete a shortage of water in some areas to put water on the market, just remember i posted this, its coming. The new amrica we live in, we dont manufacture anymore we create paper problems and then sell them on wallstreet. The warter problems that we do have stem from areas that have seen growth, and those areas didnt expand there water source system causing water levels to drop faster than before, thats mormal per say. But the knee jerks of america have come out to say we are RUNNING OUT OF WATER!!! no stupid azzez we are not running out of water some areas just dont hold the water they need. The need to upgrade there holding systems . So here we go with a new Al Gore thing per say, the green thing didnt take on wallstreet so lets go with water, remember Al Gopre said the caps are melting abd we will drown, but now it seems we are dry. WT* is wrong with the thinking in america.

November 04 2010 at 7:26 AM Report abuse rate up rate down Reply
1 reply to cvdunbar's comment
G2 Services, Ltd

I am an Environmental Engineer working in the water industry. Water will be an issue. It is becoming a commodity, but may never be traded like corn, gold, silver, etc. It is a political issue. Water wars will come between States, but I am not sure there is any way to profit from it directly.

November 08 2010 at 3:06 PM Report abuse rate up rate down Reply
pchand29

Such a wonderful topic for me.I read this article and agree with this article.Thanks to talking us about this article. http://renadexsite.com/

November 04 2010 at 6:04 AM Report abuse rate up rate down Reply
xrh74s

The Market is driven by waves of PROPAGANDAS and FORTUNE TELLING (AKA: speculations). It is no longer driven by main fundamental of supply and demand.

November 03 2010 at 3:27 PM Report abuse +1 rate up rate down Reply
John

swimdude1978, Yep, that's the key to smart investing... by stocks when they are at their low and trending up, not when they are at their high trending downward... good luck to you...

November 03 2010 at 2:35 PM Report abuse -1 rate up rate down Reply
1 reply to John's comment
bdyftns

lol......'by' ?? Did you mean 'Buy.' So you think you should buy stocks at their low. When exactly is that? When the market was going from 14,000 down to 6,600? But at 13,000 and watch your money tank? You have a crystal ball to tell when and what stocks are moving in what direction and when. You must be a multi-Billionare. Use your own advice, but don't try an palm it off on others. You're selling junk.

November 04 2010 at 2:51 AM Report abuse +1 rate up rate down Reply
abcadams1

The stock market went from 10,800 in January 2001 to 7,000 after Bush left in 2009. About a 30% loss of money during the 8 year period. Or if you invested $100,000 in 2001 and kept it there unchanged until Bush left, you would lost $30,000 or ended with $70,000. Then when Obama took over the market went from its March low of 6,500 points to over 11,170 today. A gain of around 45%. So if you started with $100,000 with Obama, in only 1 year and 9 months, you increased your money by $45,000 or $145,000 your left with. So, now that Republicans took over Congress, is it a good time to take our money out again given Repulicans in power decrease stock prices in the long run? See full article from DailyFinance: http://srph.it/ayTApN

November 03 2010 at 1:15 PM Report abuse -1 rate up rate down Reply
2 replies to abcadams1's comment
arthurans34

AS LONG AS THE FED POURS MONEY INTO THE MARKET TO MAKE OBAMA LOOK GOOD IT WILL KEEP GOING UP. IN ABOUT 2 YEARS, IT WILL TANK

November 04 2010 at 6:59 AM Report abuse +1 rate up rate down Reply
muenft

trillions of dollars have been printed or borrowed during that time. Wait till that bill comes due. Guess who they will blame then? you know him ..comeon say it..GEORGE BUSH. George will be in heaven and the deomcrats will still be blaming him fo r their mistakes.

November 08 2010 at 7:46 AM Report abuse rate up rate down Reply
cars3844

I dont agree, 2011 will be a neglegical mkt as we know it, the foecasters are full of balony as usual, those that rep, funds etc try to give a better out look to intice folks to remain possitive, after a bushel of that kind of christal balling , and continuing economic conditions , world wide. moderate growth if any may happen if we are lucky. and dont continue to blunder as though it doesent matter how ever the out come.

November 03 2010 at 1:13 PM Report abuse -1 rate up rate down Reply
tsalarms

buy stock BDSI and watch it go ion the ne3xt few months they are really on the right trend what d0o you think

November 03 2010 at 1:02 PM Report abuse +1 rate up rate down Reply
kitokato

I printed this page to read it later. Why do you make me print 6 pages, 4 of them on junk advertising when I only needed 1 or maybe 2 at the most?

November 03 2010 at 12:55 PM Report abuse rate up rate down Reply
John & Candace

I bought some Ford (F) shares when they were just over a $1 - they are now over $14 - I wish I had bought a few hundred more - hindsight is always 20/20!

November 03 2010 at 11:59 AM Report abuse +2 rate up rate down Reply
2 replies to John & Candace's comment
tsalarms

when was ford a dollar? must of been a loonnnggg time ago

November 03 2010 at 1:04 PM Report abuse -1 rate up rate down Reply
G2 Services, Ltd

Ford was under $2 in 2008.

November 08 2010 at 2:51 PM Report abuse rate up rate down Reply