Telephone and Data Systems, Inc. (TDS): Among Billionaire Mario Gabelli's Small-Cap Stock Picks with Huge Upside Potential
Mario J. Gabelli founded Gabelli Asset Management Company in 1977. The firm is now called GAMCO Investors and is an American firm headquartered in New York. It specializes in providing investment advice and brokerage services to mutual funds, institutional clients, and select investors. It is majority-owned by Mario Gabelli, who is the Chairman and CEO of it. GAMCO Investors includes two businesses: GAMCO Asset Management, with institutional and separate accounts; and Gabelli Funds. The last reported 13F filing for Q4 2024 included $9.55 billion in managed 13F securities and a top 10 holdings concentration of 16.81%. Gabelli stayed true to the principles of value investing and used a solid base created by Warren Buffett and Ben Graham, while adding some of his elements to the mix. He believes that value investing isn't focused on short-term market movements. He looks for the ignored and unloved companies that nobody covers for whatever reason, with a good business, solid management, and a good price.
As January was ending, Gabelli joined 'Squawk Box' on CNBC to discuss a range of topics. He explained how the stock market's performance is tied to company earnings, revenue growth, gross margins, expenses, and taxes, but most importantly to the market multiple, which is influenced by interest rates. These are shaped by debt, deficits, and overall confidence. Gabelli also mentioned that strategic corporate M&A was returning after a freeze caused by regulatory uncertainty and some failed deals. Activist investors are also seeking greater visibility and pushing for changes at companies. He argued against reducing the corporate tax rate below 21% but advocated for a minimum tax on a cash basis. He called for the restoration of 100% bonus depreciation, which would allow businesses, such as farmers, to fully write off new equipment purchases immediately, thereby encouraging investment in technologically advanced machinery. Gabelli mentioned that similar incentives should apply to capital expenditures in sectors like cable and referenced comments from Hans Vestberg. He noted that while corporations currently receive tax deductions for capital expenditures, these are spread over longer periods, and accelerating them would provide more immediate benefits.
Gabelli graduated summa cum laude in 1965 from Fordham University's College of Business Administration in 1965 and holds an MBA from Columbia University Graduate School of Business. He has received honorary doctorates from Fordham University and Roger Williams University. He also serves on the Boards of Boston College, Roger Williams University, Columbia University Graduate School of Business, the American-Italian Cancer Foundation, and the Foundation for Italian Art & Culture. He is a Trustee of the Winston Churchill Foundation of the US and the EL Wiegand Foundation. Gabelli was honored as Morningstar's Portfolio Manager of the Year in 1997, named Money Manager of the Year by Institutional Investor in 2011, and is a member of Barron's All-Star Century Team.
To compile the list of billionaire Mario Gabelli's 10 small-cap stock picks with huge upside potential, we sifted through the Q4 2024 13F filings of GAMCO Investors from Insider Monkey. From these filings, we checked the upside potential from CNN for the top 50 stock picks that were trading between $1 billion and $10 billion and ranked the stocks in ascending order of this upside potential. We have also added GAMCO Investors' stake in each company and the hedge fund sentiment around each stock.
Note: All data was sourced on May 8.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A well-dressed executive walking along a network of wires, demonstrating the power of a telecommunications company.
GAMCO Investors' Stake: $65.33 million
Number of Hedge Fund Holders: 36
Market Capitalization as of May 8: $3.67 billion
Average Upside Potential as of May 8: 50.10%
Telephone and Data Systems, Inc. (NYSE:TDS) is a telecom company that provides communications services to consumers, businesses, and government in the US. It operates through three segments: UScellular Wireless, UScellular Towers, and TDS Telecom. It sells and distributes its products through third-party direct sales, retail stores, sales agents, and an online platform.
Over the past three years, the company's ongoing fiber program in its TDS Telecom segment has expanded TDS Telecom's footprint by over 30%. In Q1 2025, TDS Telecom delivered 14,000 new fiber service addresses and anticipates achieving 150,000 fiber addresses for the full year. While fiber net additions of 8,300 in the quarter were lower than in previous periods due to the timing of service address delivery, the company expects these additions will increase as build-out accelerates throughout the year.
TDS Telecom is actively investing in its fiber infrastructure, with more than 80% of its full-year capital expenditures dedicated to fiber in 2025. This investment supports both expansion markets, primarily in Wisconsin and the Pacific Northwest, as well as the new Enhanced A-CAM (E-ACAM) program, which will bring fiber deeper into rural communities. The company has already begun construction in its first E-ACAM market in Wisconsin.
Overall, TDS ranks 1st on our list of billionaire Mario Gabelli's small-cap stock picks with huge upside potential. While we acknowledge the potential of TDS as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than TDS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
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