While the third quarter was challenging for equities, there were some bright spots for the Fund's holdings. Contributors to performance included Telephone & Data Systems (TDS, Financial) (0.8% of net assets as of September 30, 2023) (+131%), whose shares rose sharply following the company's announcement that it would explore strategic alternatives for U.S. cellular, a regional wireless provider owned 83% by TDS. Caterpillar (CAT, Financial) (1.7%) (+12%) shares rose during the quarter as demand remained healthy across end markets, along with rising oil prices and expectations that infrastructure spending and industrial construction would remain relatively resilient amidst broader economic concerns. Shares of Textron (TXT, Financial) (0.8%) (+15%) gained on strong business jet pricing and improving demand, evidenced by a new deal signed with NetJets in September. Amgen (AMGN, Financial) (0.5%) (+22%) shares increased amid optimism that the GLP-1 asset in its pipeline and the Horizon Therapeutics acquisition will get it back to growth and offset headwinds for some of its older drugs that are facing competition from biosimilars and next-generation drugs. Finally, shares of Sphere Entertainment (SPHR, Financial) (0.4%)(+30%) rose following its spin-off from Madison Square Garden Entertainment (MSGE, Financial) (1.3%) and enthusiasm about the successful opening of Sphere Las Vegas in late September with headliner U2.
Detractors included spirits companies Brown-Forman (BF.A, Financial)(BF.B, Financial) (2.5%) (-14%) and Diageo (DEO, Financial) (1.8%) (-13%) amid continued investor concern about a slowdown in the U.S. spirits market, though both companies' portfolios are skewed towards higher growth categories including tequila and American whiskey. Genuine Parts Company (GPC, Financial) (2.0%) (-14%) shares fell in response to the company's second quarter earnings report, which indicated that U.S. automotive growth was slowing, and voiced concerns over a slowing industrial backdrop that will impact GPC's Industrial segment, which now comprises about 40% of revenues. AMETEK (AME, Financial) (2.9%) (-9%) shares were weak in Q3 as the company has seen softer order trends and channel destocking in parts of Europe, while the pace of the company's traditional M&A engine has slowed with just one deal completed in the first half of 2023 for only $100 million. However, AMETEK's core North America region continues to experience robust growth in sales and orders, and CEO Dave Zapico has noted that the company's M&A funnel remains very robust. Finally, Deere & Co. (DE, Financial) (3.0%) (-7%) shares declined on cyclical concerns within the agricultural equipment ecosystem. Rising interest rates had the doubly damaging impact of raising questions about new machinery affordability while also negatively affecting corn and soybean prices, the combination of which could impair near term demand for new tractors and combines. 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 specific 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 September 30, 2023.
Crane NXT Co. (CXT, Financial) (less than 1% of net assets as of September 30, 2023), based in Stamford, Connecticut, and operating acroos 34 countries, is a diversified manufacturer of highly engineered industrial products comprised of three business segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials. In April 2023, the company separated into two independent companies where the Payment and Merchandising Technologies business became “Crane NXT” and the Aerospace & Electronics and Process Flow Technologies business retained the Crane Co. name.
Sphere Entertainment Co (SPHR, Financial) (0.4%) was separated from MSG Entertainment (MSGE, Financial) in April 2023. The company's assets currently include the $2.3 billion Las Vegas Sphere and the MSG regional sports networks and streaming service. The Sphere, which opened with much social media buzz in September 2023, is an 18,000+ seat venue that immerses attendees in a unique full sensory experience including the largest LED indoor and outdoor screens in the world. In addition to high profile music residencies, the Sphere will show property content and likely host a series of special events such as boxing, gaming and product unveils. The company plans to franchise this content and its know-how across a series of Spheres of varying sizes built globally.
Textron Inc. (TXT, Financial) (0.8%), based in Providence, Rhode Island, manufactures Cessna business jets and Beechcraft turboprops in its Textron Aviation segment, Bell commercial and military helicopters, including the V-22, in its Bell segment, unmanned aircraft and other military equipment in its Textron systems segment, and specialized vehicles and auto parts in its industrial segment. Textron enjoys a near duopoly in light and medium business jets alongside Embraer with superior operations and efficient product development. The business jet market has strong demand with a robust backlog. In its Bell business, Textron is introducing new commercial helicopters and has won the U.S. Army's contract to replace the UH-60 Black Hawk with the next generation tiltrotor aircraft in its V-280, which could be a $100B plus multi-decade program. Success on the V-280 has elevated the company's defense exposure. Textron's track record of improving operations and gaining share should enhance its competitive position with the backdrop of secular and structural growth in aerospace & defense. Longerterm, we would not rule out Textron merging its aerospace and defense core with a larger defense company.
Read more commentary from Gabelli here.
Returns represent past performance and do not guarantee future results. Due to market volatility, current performance may be lower or higher than the performance data quoted. Total return and average annual returns are historical and reflect changes in share price, reinvestment of dividends and capital gains and are net of expenses. Investment return and principal value will fluctuate so, upon redemption, shares may be worth more or less than their original cost. To obtain the most recent month end performance information and a prospectus, please call 800-GABELLI or visit www.gabelli.com. Investment returns and yield will fluctuate. Income will be subject to federal income tax. Investment in the Fund is neither guaranteed nor insured by the Federal Deposit Insurance Corporation or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. Performance is calculated from inception on October 1, 1992. Performance for periods less than one year is not annualized. The Adviser has waived certain fees. Yields and returns would have been lower if fees had not been waived. Not FDIC Insured. Not Bank Guaranteed. May Lose Value.
