Asked whether his bet on Bank of New York Mellon is based on the bank giving activist investor Nelson Peltz a board seat, Gabelli told "Squawk Box": "First of all the fundamentals are good. Peltz comes along and gives you a little extra tailwind. You've got a $40 billion market cap. A lot can be done there."
In a move that headed off a potential proxy battle, Bank of New York Mellon added the Trian Fund Management founder to its board last month.
He said net interest margins will rise, and speculated that interest rates could go up faster than anticipated, which would be a boon to banks. He is positive on trust banks because he believes they are more conservative and alert about how they invest their assets to get a higher current return.
When it comes to retail, Gamco focuses on niches, he said. One of his picks is auto parts vendor O'Reilly Automotive, which has seen its shares surge 37 percent this year.