Bill Gross said he wouldn’t feel comfortable investing a lot of money in U.S. stocks. He also said he liked European government bonds better than U.S. Treasurys, because the U.S. election could have a big effect on those bonds.
In an interview that aired on Monday on Bloomberg Television, the billionaire co-founder of Pimco, who was once called the “Bond King,” talked about the stocks he liked, his worries about the overvaluation of stocks, and why he’s selling his $20 million stamp collection.
“At 21 times current price to earnings, the stock market is valued at levels that have never been seen before,” Gross said. The value of many stocks is low right now, so if the economy slows down, that will be a problem.
He doesn’t want to invest in stocks all over the market, but he was interested in certain investments, especially master limited partnerships (MLPs) for pipelines, because they offer high returns and the chance for share prices to rise.
He owns stocks that yield between 8 and 8.5%, such as Energy Transfer ET, +1.42% and MPLX MPLX, +0.44%, and tells people to buy them. He likes Western Midstream Partners WES, +2.80% a lot because it yields 9.5%, he said.
Gross said that utilities have been “overblown” because of their connection to AI, but he likes NextEra Energy NEE, +2.10%.
Gross said that the stock market has been mostly driven by momentum and hopes for the new technology when he talked about AI. He also said that the stock market has stopped being related to bond yields. MSFT, +0.95% is the only big tech company that Gross owns.
Gross also owns large U.S. banks, in part because of their high yields (around 5.5%). Gross said that most people in the sector should be fine as long as there isn’t a major economic downturn. He also said that commercial real estate problems have been “reserved against in the main.”
For the medium to long term, he said that Truist Financial TFC, -0.41% and Citizens Financial CFG, +0.67% are two good stocks to get into.
As Gross talked about bonds, he said that how people reacted to recent elections in Mexico and South Africa showed how political uncertainty can hurt fixed income markets. German and French voters chose populist parties on Monday, which caused European bond prices to drop sharply. However, Gross said he liked German Bunds BX:TMBMKDE-10Y, French OATS BX:TMBMKFR-10Y, and Italian BTPs BX:TMBMKIT-10Y better than U.S. paper BX:TMUBMUSD10Y.
G. Gross said, “I think European bonds are more appealing than Treasury bonds.”
Finally, Gross was asked why he was auctioning off a stamp collection that was expected to bring in around $20 million. He said, “Well, I’m 80 years old, and it’s time to give this to other younger collectors.”
