We recently published a list of Mario Gabelli Stock Portfolio: The 10 Best Stocks to BuyIn this article, we will look at how American Express Company (NYSE:AXP) compares to the other stocks recommended by Mario Gabelli.
GAMCO Investors, Inc., formerly Gabelli Asset Management Company, is a major American company based in Rye, New York. The company specializes in investment advisory and brokerage services for mutual funds, institutional clients and select investors. The company was founded and is majority owned by Mario Gabelli, who has earned over $750 million in recent years.
Veteran investor Mario Gabelli has made millions of dollars by betting on the unloved companies. He likes to invest in companies that are NOT followed or covered by Wall Street analysts. If the companies are not part of an index, that makes them even more attractive.
The hedge fund manager remains true to active value investing. His investment philosophy of focusing on value stocks rather than growth stocks prevailed even when passive index funds and Nasdaq “FAANG” dominated the market during the US Federal Reserve’s loose interest rate policy. His investment secret is simple: “Find a good company with good management, buy the stock at a reasonable price and then hold that stock for the long term.”
According to Insider Monkey’s database for Q2 2024, industrial goods account for about 21.7% of the total investment portfolio.
What lies in the future for the US stock market according to Gabelli Funds
Gabelli Funds expects the US presidential election to increase market volatility in the second half of 2024. At the same time, the highly anticipated interest rate cuts in September could spur rotation into areas of the market that have lagged throughout the year. The investment firm expects increased volatility as a result of the election. However, economic weakness and volatility are expected to be offset by underlying rotation and lower interest rates.
Gabelli seems optimistic about the U.S. economy as a whole. He believes companies have healthy cash flows and gross margins are better. The only thing that could weigh on U.S. stocks is geopolitical risk.
Gabelli recently participated in Barron’s prestigious roundtable discussion. He estimates that global GDP, as measured by the International Monetary Fund, is expected to be around $115 trillion in 2025. The US contributes 26% and China 17%. The consumer accounts for about 70% of the US economy, and industrial spending accounts for about 12%.
Mario Gabelli mentioned that the Fed is focused on the four Rs. The first is to “keep interest rates high for longer.” The second R is “the continued emptying of the central bank’s balance sheet,” which is currently $60 billion a month, compared to about $95 billion in early 2024. Next, the Fed continues to make efforts to “reduce aggregate demand.” However, higher government spending continues to offset these efforts. Finally, the chairman continues to deploy “rhetoric about reducing inflation.”
Mergers and acquisitions (M&As) and other financing structuring strategies are expected to increase significantly for numerous reasons. Gabelli believes that several private equity funds are nearing the end of their 10-year life cycle and limited partners (LPs) need liquidity. Therefore, this situation will lead to higher turnover. Mario Gabelli expects M&A to pick up globally in H2 2024.
While the S&P 500 is up over 15% year-to-date, the experienced investor believes stocks can deliver an annual growth rate of about 8% in the coming years, well above the returns from fixed income securities.
Mario Gabelli is optimistic about these sectors
Mario Gabelli seems to have an increasing interest in sports franchises. Sports will continue to be the focus of linear television and streaming. Rumor has it that media companies are shelling out large sums for broadcast and streaming rights.
In addition, the experienced hedge fund manager, like other market experts, believes that artificial intelligence is a great technology.
Gabelli’s next choice is natural gas. He believes there is huge potential for prices to increase over the next few years. This is because some producers are shutting down their wells or producing less and demand continues to rise relative to power generators and LNG exports.
At Insider Monkey, we’re obsessed with the stocks hedge funds invest in. The reason is simple: Our research shows we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A close-up of a payment terminal, illustrating the complexity of a payment network.
American Express Company (NYSE:AXP)
Value of GAMCO investor stake: $131.12 million
Percentage of GAMCO Investors’ 13F portfolio: 1.42%
Number of hedge fund owners: 68
The American Express Company (NYSE: AXP) is a global financial institution that provides debit and credit card payment products to consumers and businesses.
Payments are increasingly being processed electronically, which continues to benefit the American Express Company (NYSE:AXP). The company has strong brand equity that attracts loyal and highly profitable customers. Its growth should continue to be fueled by healthy international activity and new cardholders, especially young people.
In Q2 2024, American Express Company (NYSE:AXP) reported robust 6% year-over-year growth in billings, healthy new card acquisitions of 3.3 million, and double-digit growth in card fee revenue for 24th consecutive quarter.
Network effects are expected to continue to fuel the company’s business. The company has approximately 150 million credit cards in circulation, accepted by millions of merchants. Since the end of 2021, the company has grown its business significantly, increasing revenue by approximately 50% and cardholder spending by approximately 40%. The company has added approximately 23 million new cards and more than 30 million merchant locations.
Payment volumes, card fees and interest income from card loans should be able to support overall revenue growth going forward. Apart from these drivers, healthy lending and operating leverage can boost earnings growth.
Analysts at Royal Bank of Canada increased their price target on shares of American Express Company (NYSE:AXP) from $265.00 to $267.00. They issued a rating on the stock on March 22.and July. According to Insider Monkey, 68 hedge funds were bullish on American Express Company (NYSE:AXP) in Q2 2024.
Artisan Partners, an investment management firm, has released its investor letter for the first quarter of 2024. Here is what the fund said about American Express Company (NYSE:AXP):
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion of inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services processed through its network. That dollar value is nominal, of course. When inflation drives up the value of those goods and services, as it has in recent years, American Express will capture that value through its fee structure. Inflation over the past few years has clearly been a benefit. Aside from its inherent inflation protection, the business is very strong. Payments continue to shift toward electronic forms, which benefits American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong, with revenue comfortably outpacing GDP.”
Total AXP 6th place on our list of the best stocks to buy according to Mario Gabelli. While we recognize AXP’s potential as an investment, we believe some highly undervalued AI stocks promise higher returns and do so in a shorter time frame. If you are looking for a highly undervalued AI stock that is more promising than AXP but trades at less than 5 times its earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
