Billionaire investor Mario Gabelli is avoiding cash, says SPACs have 'silver lining'

Published Mon, May 3 20219:21 AM EDTUpdated Mon, May 3 202110:36 AM EDT

Value investor Mario Gabelli, founder and CEO of Gamco Investors, said Monday he's expecting a robust year for the U.S. economy because of the Covid-19 vaccine rollout and a deluge of government stimulus. Gabelli also shared his views on special purpose acquisition companies, after Berkshire Hathaway executives Warren Buffett and Charlie Munger panned SPACs over the weekend. With inflation expected to rise and companies set to embark on deferred capital projects, Gabelli made it clear he won't be sitting on the sidelines. "I'm not going to keep money in cash," the billionaire said on CNBC's " Squawk Box ." Gabelli said companies had to crack down on costs in 2020, when profits came under pressure, thanks to a sharp pullback in demand as the coronavirus pandemic halted business activity. But now, with Americans returning to some semblance of normality and costs under control, those same companies should start to build the new factories and equipment they had put off. "Last year, everyone became sensitive about cost. Even though costs are rising, they did examine costs and then they deferred" capital expenditures, Gabelli said. "In reading annual reports, you get a lot more with regards to where cap ex is going and how it's going to increase." "GDP in real terms is one thing, but my companies report in nominal terms," he added. "That is real GDP plus inflation: We're talking 10%, 11%, 12% growth rates in the economy." But the economic boom won't end with 2021, according to Gabelli. He argued that the 2022 midterm elections will put pressure on Capitol Hill to pass some version of a major infrastructure overhaul. "The notion of infrastructure, the notion of working on the climate with regards to transmission, the notion of putting money into making sure that companies stay onshore or reshoring to the United States: Those are all important elements," he said. Gabelli, a longtime investor in Berkshire Hathaway, also offered thoughts on the conglomerate's annual meeting that occurred over the weekend. While he said he shared some of the skepticism of SPACs that Buffett and Munger aired during Berkshire's meeting, he did say the acquisition companies offer some "silver linings." In the U.S., the number of companies listed on exchanges per million people has fallen from around 30 in 1996 to under 15 within the past few years, according to data collected by the World Bank. Easier access to venture, growth and private-equity capital means has allowed companies to prolong, or skip altogether, a tenure in the public markets. While explanations for the decline vary, some suspect that increases in regulations, shareholder lawsuits and activist demands have made public markets less attractive. The advent of SPACs, Gabelli said, may help to slow that trend, which in turn could encourage high-growth companies to enter public markets instead of staying private. "Thirty-six months ago we were talking about the shortage of public companies that were trading," he said. Now, "we're bringing out a slew of companies. Some of them, like Nikola were just 'eh,' but some of them will turn out to be winners just like they did in 1999."

Mario Gabelli, Gabelli Asset Management Company Investors

Scott Mlyn | CNBC

Gabelli also shared his views on special purpose acquisition companies, after Berkshire Hathaway executives Warren Buffett and Charlie Munger panned SPACs over the weekend.

With inflation expected to rise and companies set to embark on deferred capital projects, Gabelli made it clear he won't be sitting on the sidelines.

"I'm not going to keep money in cash," the billionaire said on CNBC's "Squawk Box."