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What Are Mario Gabelli’s Top Financial Picks?

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Mario Gabelli on financial sector

Mario Gabelli shared some of his top investment picks in a recent interview. He’s positive on the financial sector (XLF). In the previous part of this series, we discussed Gabelli’s belief that the first quarter earnings growth in the financial sector was spectacular.

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Gabelli’s stock picks

State Street (STT), FCB Financial Holdings (FCB), and the Bank of New York Mellon (BK) are some of Gabelli’s top financial picks. He’s more positive about regional banks and trust banks. He believes the proposed regulation changes will heavily impact these banks.

He also believes that the interest rates will rise gradually and that investors’ activity in the capital market will improve further. In 1Q17, financial companies’ capital market segment saw strong revenue. The above chart shows how these financial stocks have performed since the US election.

Price-to-earnings multiples of the financial sector

The financial sector (VFH) of the S&P 500 Index is trading at a price-to-earnings multiple of 15.08x. The broader market S&P 500 Index (SPY) is trading at a price-to-earnings multiple of 21.05x. This shows that this sector is trading at lower multiples and seems cheap as compared to the broader market.

Recently, Morgan Stanley’s chief equity strategist Mike Wilson shared his bullish view on the financial sector. He believes factors such as the gradual rate hike, proposed deregulation, and corporate earnings could drive the performance of the financial sector.

In the next part of this series, we’ll analyze Mario Gabelli’s top infrastructure plays.

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