The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By Lisa Springer NEW YORK ( StreetAuthority) -- In the value investing Hall of Fame, financial expert Mario Gabelli should earn top honors. Gabelli leads GAMCO, a $36 billion global investment firm that has generated 16% annual returns for investors since the firm's inception in 1977. Gabelli uses a bottom-up, value-driven approach to identify stocks that are undervalued. His unique approach involves determining a public company's worth based on what a private investor might be willing to pay for it, and then looks for a catalyst that could unlock the company's hidden value. The catalyst can be a regulatory change, business sale or spin-off, or a change in management. In the case of three of his latest portfolio additions, Gabelli looked for recent spinoffs that have great upside potential. Each stock has posted double-digit gains since becoming independent companies. And there could be further gains ahead. Here they are: 1. Xylem ( XYL) Gabelli acquired a $50.5 million stake in Xylem, a provider of equipment and technology for water-testing and wastewater remediation. Since being spun off from ITT ( ITT) last October, Xylem shares have climbed almost 17%. One of the long-term catalysts for Xylem's growth is an aging global water infrastructure that will require nearly $1 trillion of investment during the next 20 years. Another one is the increasing demand for new technologies to treat wastewater created by hydraulic fracturing (or "fracking"), a technique used for extracting oil and gas from underground rock formations. The process requires millions of gallons of water for each well, and water shortages are becoming a major challenge at drilling sites. Drillers have been investing in technologies to recycle wastewater produced by fracking, and Xylem is particularly well-positioned to benefit since it already supplies the instruments that test water quality for fracking contaminants. Water testing and treatment is a $500 billion business globally, and Xylem has the scale and worldwide presence to be an attractive asset to a much larger company. Looking at the numbers, it's easy to see why the stock is a solid pick. Xylem grew revenue 7% in 2011 to $3.8 billion in comparison with the previous year, while earnings improved a nice 30% to $358 million, or $1.93 per share. The company's EBITDA totaled $624 million -- nearly twice the reported earnings figure -- which gives it plenty of cash to fund growth initiatives. Xylem is targeting 4% to 6% revenue growth and 8% to 17% earnings growth this year. Analysts peg earnings growth at 13%.