Mario Gabelli sees exceptionally good US financial development in 2021
Scott Mlyn | CNBC
Investor Mario Gabelli gave a positive note to the U.S. economy on Tuesday despite the number of coronavirus cases in the country increasing.
More than 8 million coronavirus cases have been confirmed in the U.S. alone, according to Johns Hopkins University. A CNBC analysis also found that cases are increasing by 5% or more in 35 states.
This recent surge in infections is due to recent economic data showing signs that the US recovery may stall. Gabelli, however, assumes that the US economy will continue to recover in the new year.
“I see exceptionally good growth in the US in 2021,” said Gabelli, chairman of Gamco Investors, at the annual CNBC Financial Advisor Summit. “That’s because of a long runway for automobiles, a long runway for housing, and I’m seeing some return in commercial aviation spending.”
Fiat Chrysler reported earlier this month that auto sales rose 38% from the second to the third quarter. General Motors announced that auto sales improved sequentially every month for the third quarter.
The used car market in the USA was also on fire this year, as more and more people avoid mass transport during the coronavirus pandemic and the shares in Autonation and CarMax increase significantly.
On the travel front on Monday, the Transportation Security Administration announced that it had screened more than 1 million travelers over the weekend and hit a seven-month high.
Airline stocks were under massive pressure in 2020 as the pandemic hit the entire travel industry. However, airline stocks have risen sharply in the past six months as travelers feel more comfortable flying. Delta Air Lines and United are up at least 30% in the past six months. JetBlue and American Airlines gained 42.5% and 15.7% respectively during this period.
Gabelli also recommended that investors buy an exchange-traded market tracking fund, which could result in annualized returns of between 6% and 8% over the next decade. Gabelli sees some risks on the horizon, however.
He noted that while the Federal Reserve will maintain an easy stance on monetary policy, short-term interest rates will rise “over time”.
“If I go back 30 to 40 years ago, the 10 year return was 7% or 8%. Today it is [about] 70 basis points, “said Gabelli.” So what will happen to multiples if these rates invariably rise to reflect underlying inflation? “
Gabelli added that “taxes are likely to rise,” which would hamper corporate profits.
Sports betting opportunity
The investor highlighted sports betting companies as an attractive investment opportunity as professional sports leagues extend their season and more states legalize gambling.
“I’m considering how I can get in on it,” he said, noting that stocks like Manchester United, Liberty Media Braves and MSG Networks are attractive investments to face this trend.
Manchester United shares are down more than 30% since the start of the year, as has Braves shares. MSG Networks – which broadcasts the New York Knicks and New York Rangers games – is down 46.8% in 2020.