Mario Gabelli Loves These Water Stocks

Earlier in July, value investor, founder and CEO of GAMCO Investors Inc. revealed that he is bullish on water industry stocks. However, Mario Gabelli shied away from naming his favorite picks in the sector apart from Xylem Inc XYL.

Gabelli is a guest for this Sunday's edition of Wall Street Week. In this excerpt from that interview, Gabelli discusses what makes him bullish on the sector and all the water industry stocks that excite him currently, which include: Badger Meter, Inc. BMI, Mueller Water Products, Inc. MWA and Gorman-Rupp Co GRC.

The Thesis

"It has nothing to do with the drought in California," Gabelli said. "It has to basically, due to the fact that water consumption is 10 percent consumption, 30 or 40 percent for industry and 60 [...] for agriculture. And so, we look at that infrastructure support. Who makes the equipment? Who services it? Who does the processing? Who finds it?"

Xylem And Badger Meter

Gabelli was asked for his favorite stocks in the sector. He replied, "The names are fairly simple that we own. We are buying Xylem, which is a spin-off from AT&T. they have a new CEO, Pat Decker (Patrick K. Decker). He's 180 million shares; the stock's around $35. It's coming— a little nervous short-term because of what happened to Franklin Electric – their stock dropped, which is good.

"And then there are several other companies in the water business like Badger Meter was down because of certain air pockets."

Mueller Water

He continued, "I am very interested in a company called Mueller Water, which makes fire hydrant among other things. But they also have products that somebody else wants. That's a $8.55 stock with about 100 million shares."

Gorman-Rupp

"And then there are several others that we like. Gorman-Rupp: big pumps to move water. Other companies that are in that area. Then you have companies that have the ingredients to test water. So that if you want to know that you are meeting EPA requirements," Gabelli concluded.