We recently published a list of 10 Best Stocks to Buy According to Billionaire Mario Gabelli. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against other stocks to buy according to billionaire Mario Gabelli.
GAMCO Investors, formerly known as Gabelli Asset Management Company, is an investment firm with its headquarters in Rye, New York. The company has expertise in providing investment advice and brokerage services to mutual funds, institutional clients, and select investors. It was founded and is majority-owned by Mario Gabelli. Mr. Gabelli is the Chairman and Chief Executive Officer of GAMCO Investors, Inc.
GAMCO Investors’ Investment Philosophy
With respect to value, the company’s investment approach revolves around utilizing fundamental, bottom-up research to spot securities selling below their intrinsic value. Furthermore, the investment firm seeks to identify mispriced companies possessing healthy businesses and the presence of a catalyst that will surface value. The firm’s investment teams use a broad universe in the benchmark-agnostic approach to cover all sectors of the market and check evolving themes and value-based opportunities.
Investment Themes For 2025
The firm’s portfolio managers have shared themes that they believe will shape markets in 2025. As per Co-CIOs Chris Marangi and Kevin Dreyer, a resurgence of M&A activity will take place. Industry consolidation is one of the favorite catalysts because it could immediately surface PMV (Private Market Value) either as a target or as a company similarly situated to a target. Notably, increased rates and activist federal agencies depressed M&A activity over the previous 2 years. The new regime in Washington is almost certain to fuel deal activity.
The AI investment returns were largely accrued to companies that are involved in the buildout of computing infrastructure. As a result, investment returns for companies who are creating end user-facing products and services using AI technology have lagged, says John Belton, Co-Portfolio Manager of the Gabelli Growth Innovators ETF (GGRW). This dynamic is expected to reverse over the coming years with GenAI migrating from research labs to user applications and entering a new phase of commercialization. Next, the rise in geopolitical instability continues to drive more NATO members to prioritize defense and military investments, leading to higher defense budgets throughout Europe and the U.S., says Tony Bancroft, Portfolio Manager of the Gabelli Commercial Aerospace and Defense ETF (GCAD).
Tim Winter, Co-Portfolio Manager of the Gabelli Utilities Fund (GABUX), believes that infrastructure improvements can make utilities attractive. Finally, Chris Mancini, who is the Co-Portfolio Manager of the Gabelli Gold Fund (GOLDX), believes that gold continues to offer a good opportunity for investors who are looking for a haven during uncertain times.
Amidst such trends, let us now have a look at the 10 Best Stocks to Buy According to Billionaire Mario Gabelli.
Our Methodology
To make the list of 10 Best Stocks to Buy According to Billionaire Mario Gabelli, we selected the top 10 stocks in GAMCO Investors’ portfolio as of its Q4 2024 13F filing. We settled on the hedge fund’s 10 biggest holdings. Finally, we ranked the stocks in ascending order based on the value of GAMCO Investors, Inc.’s equity stakes. Additionally, we have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 71
GAMCO Investors’ Stake: $152.6 million
American Express Company (NYSE:AXP) operates as an integrated payments company. Robert W. Baird analyst David George upped the company’s stock to a “Hold” rating, setting a price objective of $265.00. The rating is backed by factors highlighting a balanced risk/reward profile for the company. Despite the market sell-off, the high-quality franchise of American Express Company (NYSE:AXP) is projected to deliver lower revenue growth expectations across operating environments. The company has showcased strong execution on revenue and EPS targets, delivering notable growth in 2024. In FY 2024, the company delivered record revenues of $65.9 billion, implying a 10% increase on an FX-adjusted basis, while EPS came in at $14.01, up 25% YoY.
Furthermore, the analyst opines that the recent underperformance has improved the risk/reward trade-off. American Express Company (NYSE:AXP)’s credit quality remains strong. Elsewhere, Fitch Ratings mentioned about the company’s robust franchise, spend-centric business model, higher-than-average credit performance and profitability, relatively diverse funding, and strong liquidity and risk-adjusted capitalization. Notably, American Express Company (NYSE:AXP) exited 2024 with increased momentum, with billings growth accelerating to 8% in the fourth quarter, fueled by healthy spending from its consumer and commercial customers during the holiday season.
Bretton Capital Management, an investment management company, published a Q4 2024 investor letter. Here is what the fund said:
“American Express Company (NYSE:AXP) was our best performing stock last year, returning 60%, which was on top of 2023’s 29%. Its premium credit cards are more popular than ever, and its moderately affluent customer base continues to spend. American Express did especially well signing up younger cardholders, a great sign that its growth can be sustained for years to come. The combination of healthy revenue growth and tight expense control led to an earnings-per-share growth of 25%.”
Overall, AXP ranks 5th on our list of best stocks to buy according to billionaire Mario Gabelli. While we acknowledge the potential of AXP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than AXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
