Value investor David Katz likes financials and this biotech stock in 2021

Published Wed, Dec 30 20203:06 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

(This story is for CNBC Pro subscribers only.) Matrix Asset Advisors' David Katz told CNBC on Wednesday he believes financial stocks are positioned well to have a strong rebound in 2021. The sector has lagged many areas of the market this year, as investors worried about credit risk related to the coronavirus pandemic-induced economic downturn. However, Katz said on "The Exchange" that the dark cloud over banks is dissipating as the U.S. economy improves and the regulatory environment under President-elect Joe Biden takes shape. "Their loan portfolios are very good. The yield curve is steepening. Janet Yellen as the head of the Treasury is a net positive," Katz said, referencing the former Federal Reserve chair who has been nominated to lead the Treasury Department. "We think all of those things are good yet it's the cheapest area of the market by a lot," added the prominent value investor. "We think the dividends are safe and will start to grow again next year, and we think people are going to seek those out, so we expect a lot of money to flow in and you want to get in there early." Outside of the financial sector, Katz said two other stocks he believes are attractive for investors are Gilead Sciences and Pinnacle West Capital Corp. While investors may have become familiar with Gilead for its coronavirus treatment remdesivir, Katz said it is the biotech company's portfolio of cancer drugs that stands out. Gilead "makes a boat load of money, pays over a 4.5% dividend yield," Katz said. "It's at a great price," he added. Shares of Gilead are down more than 12% this year, trading around $57 apiece Wednesday. The S & P 500 , for comparison, is up nearly 16% year to date. Phoenix-based Pinnacle West, an energy holding company that counts Arizona Public Service as its principal subsidiary, is a solid investment for income-seeking investors, Katz said. "Pinnacle West is a dull company, but dull paying a 4.5% dividend is going to be very attractive when you can get zero in money market" fund, Katz said. "We think it's very, very timely, and we think dividend yields are going to be a really good place to be in the upcoming year, as well." Pinnacle West shares were slightly higher Wednesday at around $79 each. The stock is down almost 12% in 2020.

David Katz, CIO of Matrix Asset Advisors

Adam Jeffery | CNBC

(This story is for CNBC Pro subscribers only.)

Matrix Asset Advisors' David Katz told CNBC on Wednesday he believes financial stocks are positioned well to have a strong rebound in 2021.

The sector has lagged many areas of the market this year, as investors worried about credit risk related to the coronavirus pandemic-induced economic downturn. However, Katz said on "The Exchange" that the dark cloud over banks is dissipating as the U.S. economy improves and the regulatory environment under President-elect Joe Biden takes shape.

"Their loan portfolios are very good. The yield curve is steepening. Janet Yellen as the head of the Treasury is a net positive," Katz said, referencing the former Federal Reserve chair who has been nominated to lead the Treasury Department.