Flowserve Corporation (FLS): Among Billionaire Mario Gabelli's Small-Cap Stock Picks with Huge Upside Potential

We recently published a list of Billionaire Mario Gabelli’s 10 Small-Cap Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where Flowserve Corporation (NYSE:FLS) stands against other 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.

Our Methodology

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).

Flowserve Corporation (NYSE:FLS)

GAMCO Investors’ Stake: $75.93 million

Number of Hedge Fund Holders: 60

Market Capitalization as of May 8: $6.82 billion

Average Upside Potential as of May 8: 22.73%

Flowserve Corporation (NYSE:FLS) designs, manufactures, distributes, and services industrial flow management equipment. It operates in two segments: Flowserve Pump Division and Flow Control Division. It offers custom-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems, replacement parts, and related aftermarket services.

The company’s Flow Control Division/FCD had its bookings surge by 21% year-over-year in Q1 2025 due to double-digit increases in both original equipment and aftermarket activity. FCD also benefited from the strength in the nuclear sector, alongside positive contributions from general industries and energy markets. While FCD’s sales growth of 2% in the quarter was modest, it exceeded expectations.

On March 17, Baird analyst Michael Halloran upgraded Flowserve to Outperform from Neutral with an unchanged price target of $71. Baird believes that the company’s earnings power is attractive, as there is a compelling internally fueled margin expansion story. Flowserve Corporation (NYSE:FLS) anticipates continued margin expansion within FCD, partly due to disciplined pricing & cost management, and the benefits of the company’s 80-20 complexity reduction program.

Artisan Small Cap Fund stated the following regarding Flowserve Corporation (NYSE:FLS) in its Q4 2024 investor letter:

“During the quarter, we initiated new GardenSM positions in VSE, Flowserve Corporation (NYSE:FLS) and Integer Holdings. Flowserve is a leading provider of fluid motion and control products and services. The company designs, manufactures and services a wide range of pumps, valves, seals, automation solutions and related systems for industries that require the management and transfer of fluids. As we highlight in the Stewardship Update section later in this letter, we believe the company is in a good position to benefit from rising natural gas production that is being driven by rising baseload power needs for data centers. And within the oil end market, a loosening of regulatory policies could increase production demands.”

Overall, FLS ranks 6th on our list of billionaire Mario Gabelli’s small-cap stock picks with huge upside potential. While we acknowledge the potential of FLS 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 FLS 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.