Mario Gabelli sees ‘extraordinarily good’ U.S. economic growth in 2021

Investing

Mario Gabelli

Scott Mlyn | CNBC

Investor Mario Gabelli struck a positive note on Tuesday on the U.S. economy even as coronavirus cases in the country are on the rise.

More than 8 million coronavirus cases have been confirmed in the U.S. alone, according to data from Johns Hopkins University. A CNBC analysis also found that cases are growing by 5% or more in 35 states.

This recent infection increase comes as the latest economic data shows signs the U.S. recovery may be stalling. However, Gabelli thinks the U.S. economy will continue to recover into the new year.

“In the U.S., I see extraordinarily good growth in 2021,” Gabelli, chairman of Gamco Investors, said at the annual CNBC Financial Advisor Summit. “That’s because of a long runway for automobiles, a long runway for housing and I see some return of spending in commercial aviation.”

Fiat Chrysler reported earlier this month their auto sales jumped 38% from the second to third quarter. Meanwhile, General Motors said its car sales improved sequentially each month during the third quarter.

The used-car market in the U.S. has also been on fire this year as more people avoid mass transportation during the coronavirus pandemic, pushing shares of Autonation and CarMax sharply higher.

On the travel front, the Transportation Security Administration said Monday they screened more than 1 million travelers over the weekend, reaching a seven-month high.

Airline stocks have been under massive pressure in 2020 as the pandemic upended the overall travel industry. However, airline shares are up sharply over the past six months as the travelers feel more comfortable flying. Delta Air Lines and United are both up at least 30% over the past six months. JetBlue and American Airlines have gained 42.5% and 15.7%, respectively, over that time period.

Gabelli also advised investors buy a market-tracking exchange-traded fund, which could lead to annualized returns ranging between 6% to 8% over the next decade. To be sure, Gabelli sees some risks on the horizon.

He noted that while the Federal Reserve is expected to maintain an easy stance on monetary policy near term rates will start rising “over time.”

“If I go back 30 to 40 years ago, the 10-year yield was at 7% or 8%. Today, it’s [about] 70 basis points,” Gabelli said. “So, what’s going to happen to multiples when those rates invariably rise to reflect the underlying inflation?”

Gabelli added that “taxes are likely to go up,” which would hinder corporate profits.

Opportunity in sports betting

The investor highlighted sports betting companies as an attractive investment opportunity as professional sports leagues ramp up their seasons and more states legalize sports gambling.

“I’m looking at how to participate in that,” he said, noting that stocks such as Manchester United, Liberty Media Braves and MSG Networks are attractive investments with exposure to this trend.

Manchester United shares are down more than 30% year to date along with Braves stock. MSG Networks — which broadcasts games of the New York Knicks and New York Rangers —  has dropped 46.8% in 2020.

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