Finding value plays in a market plagued by inflation, rising commodity prices, and fears of a recession is difficult, to say the least. Due to the Federal Reserve (Fed) raising interest rates, various sectors have seen a pullback in equity prices, which could be a good thing for value investors looking to snap up some bargains.
Similarly, the war in Ukraine and the energy crisis in Europe have market participants focusing on manufacturing sectors and energy companies, which have had a solid run in 2022.
On the other hand, there are other additional interesting sectors to look at, according to Mario Gabelli, chairman, and CEO of Gabelli Asset Management, who joined CNBC’s Squawk Box on September 9 to discuss where he sees additional investment opportunities.
Notably, the billionaire value investor highlighted both the farming and aerospace sectors as investment ideas due to the fact that there are firms whose stocks should go up both in the short and long term.
Agriculture and aerospace
Gabelli underlined that there is a lot of confusion regarding the new proposed 15% tax indicating that the agricultural sector could benefit due to a $535 billion government stimulus, among other things.
“We like companies like Deere (NYSE: DE), but we particularly like at the moment Case New Holland (NYSE: CNHI), there are 1.3 million shares, the stock is around $12; we believe they can earn $1.5 to $2 within 12 months. Deere is going to earn $22, plus or minus, and that stock is $305, <…>, so that’s an area that we like.”
He also added:
“Two companies in the aerospace & defense industry. One is Aerojet (NYSE: AJRD), the Federal Trade Commission in early February, based on the data, they had turned down Lockheed Martin (NYSE: LMT), and Lockheed walked away, that was a $51 deal. The stock is at $44; we just bought another 800,000 shares.”
Hypersonics and ground defense
Hypersonic weaponry seems to be the buzzword in the defense sector, as Gabelli also mentions that this type of weaponry is what they’re paying attention to as well, as Lockheed recently performed a successful test.
The second company in this market segment that Gabelli mentioned is Crane Holdings (NYSE: CR), which is looking to separate into two distinct entities, and in the next few years, will be earning $6-$7 per share, according to Gabelli.
It seems that billionaire value investors are looking at the two hottest sectors to find stocks for the long-term. Food and defense are the ones that make a lot of sense in a world weighed down by fears of war and food shortages.
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