Billionaire Mario Gabelli Lays Out 5 Finance Stocks That Should Get a Trump Boost

Billionaire Mario Gabelli, who manages around $37.5 billion through his hedge fund GAMCO Investors, was one of the few Wall Street titans who had predicted Mr. Trump’s win well in advance at Barron’s investor conference earlier in the year. In one of his recent interviews after the election results were announced, Mr. Gabelli revealed that with Mr. Trump at the helm and interest rates poised to rise he is bullish on sectors like infrastructure and financials going forward. Furthermore, he also forecasted that “Financials are going to be sharply up in 2017.” Within the financial space, Mr. Gabelli is particularly bullish on trust banks, which he thinks can become ‘global powerhouse’ in the coming years, and on money management firms.

If one takes a look at GAMCO Investors’ latest 13F filing, it becomes clear that Mr. Gabelli believes in walking the talk. Although financial stocks accounted for only 10% of the $15.37 billion that the fund’s equity portfolio was worth at the end of September, all the financial stocks that Mr. Gabelli discussed during the interview were included at that time. In this post, we are going to discuss in detail  five financial stocks that Mr. Gabelli is currently bullish on and their recent performance.

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At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5 T. Rowe Price Group Inc (NASDAQ:TROW)

– Shares Held By GAMCO Investors (as of September 30) : 189,230

– Value of the Holding (as of September 30): $12.58 Million

Let’s start with T. Rowe Price Group Inc (NASDAQ:TROW), in which GAMCO sold 450 shares during the third quarter. T. Rowe Price Group Inc (NASDAQ:TROW’s stock has been one of the biggest beneficiaries of Mr. Trump’s win having registered a gain of more than 16% after election results were declared. Although this recent rally has pushed the stock back in the green for 2016, it has also lowered its forward yield to less than 3%. Earlier this month, the company revealed that after 35 years at the helm, its Chairman and CIO Brian Rogers will retire on March 31, next year. The company has appointed six people to share the responsibility of the CIO following Mr. Rogers’ departure. On November 10, analysts at UBS AG upgraded T. Rowe Price’s stock to ‘Buy’ from ‘Neutral’ and also upped their price target on it to $82 from $66, suggesting a potential upside of 11.6%.

#4 Waddell & Reed Financial, Inc. (NYSE:WDR)

– Shares Held By GAMCO Investors (as of September 30) : 1.37 Million

– Value of the Holding (as of September 30): $24.93 Million

GAMCO Investors upped its stake in Waddell & Reed Financial, Inc. (NYSE:WDR) by 33% during the third quarter. Matthew Tewksbury‘s Stevens Capital Management was another hedge fund covered by us that increased its holding in the company by 18% to 95,312 shares in the same period. Although Waddell & Reed Financial, Inc. (NYSE:WDR)’s stock has also benefitted immensely from Mr. Trump’s victory in the last few days, it is still trading down by 33.25% year-to-date. Waddell & Reed Financial is one of the best dividend stocks in the financial sector currently, sporting a forward yield of close to 10%. For its most recent quarter, the company reported EPS of $0.64 on revenue of $303.09 million versus analysts’ expectation of EPS of $0.51 on revenue of $295.65 million.

#3 Northern Trust Corporation (NASDAQ:NTRS)

– Shares Held By GAMCO Investors (as of September 30) : 1.03 Million

– Value of the Holding (as of September 30): $70.01 Million

Moving on, GAMCO Investors reduced its stake in Northern Trust Corporation (NASDAQ:NTRS) marginally, by 3,075 shares, between July and September. Northern Trust Corporation (NASDAQ:NTRS)’s stock was already trading in the green for 2016 before the elections results were announced. However, the gains it has registered since then have helped it to reach $83.09, its new all-time high since the financial crisis. According to most analysts who track the stock, it is currently trading at an expensive valuation and can see a correction going forward. The stock currently sports an average rating of ‘Hold’ and an average price target of $74.62 from 18 leading analysts on the Street, which suggests that it can see a downside of more than 8% from its current price.

#2 State Street Corp (NYSE:STT)

– Shares Held By GAMCO Investors (as of September 30) : 1.57 Million

– Value of the Holding (as of September 30): $109.23 Million

Amid a 27% rise in State Street Corp (NYSE:STT)’s stock during the third quarter, GAMCO Investors reduced its stake in the financial holding company by 3%. State Street Corp (NYSE:STT) lost a chunk of its market cap during the first half of 2016, but managed to recoup the losses and its stock is now trading up by over 18% year-to-date. The company has managed to beat analysts’ earnings expectations for the past four quarters and most analysts who cover the stock think that this trend will continue in the future. On November 14, analysts at Morgan Stanley upgraded the stock to ‘Equal Weight’ from ‘under Weight’ and also upped their price target to $84 from $64, which suggests a potential upside of 7% from its current price.

 #1 Bank of New York Mellon Corp (NYSE:BK)

– Shares Held By GAMCO Investors (as of September 30) : 5.94 Million

– Value of the Holding (as of September 30): $237.06 Million

Although GAMCO Investors’ reduced its stake in Bank of New York Mellon Corp (NYSE:BK) by 3% during the third quarter, the investment company remained the fund’s largest holding at the end of September. Bank of New York Mellon Corp (NYSE:BK)’s stock saw a phenomenal run between 2012 and 2015, but was range-bound for a long time in 2016. In the last few weeks it has again resumed its uptrend and is currently trading 15.09% in the green year-to-date. Earlier this month, the SEC has sent subpoenas to Bank of New York Mellon and four other depository banks over allegations that they have been mishandling securities in the ADR (American depositary receipts) market. On November 21, analysts at Buckingham Research downgraded the stock to ‘Neutral’ from ‘Buy’.

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