The Bull Case for Utilities and Gold: Why Gabelli's Hybrid Strategy is Paying Off in Volatile Markets

In a quarter defined by market turbulence and shifting investor sentiment, Gabelli Funds' hybrid growth-value strategy has delivered standout results, particularly in two sectors primed for long-term resilience: utilities and precious metals. With the S&P 500 Composite slumping 4.3% in Q1 2025, Gabelli's focus on regulated utilities and gold equities—sectors insulated from economic volatility and powered by structural growth drivers—propelled its funds to outperformance. Here's why investors should take note.

The Gold Rush: Gabelli's 32% Surge and the Case for Mining Equities

Gabelli's Gold Fund led the charge in Q1 2025, posting a 32% return, far outpacing the 19% rise in gold prices to $3,124 per ounce. This disparity highlights the power of gold equities over the metal itself, a theme Gabelli's portfolio manager Caesar Bryan has long emphasized.

Key Drivers of Performance:
- Stock-Picking Excellence: Top contributors like Agnico Eagle (up 39.1%) and Newmont leveraged rising gold prices and operational efficiencies.
- ETF Demand Surge: Gold ETF holdings jumped by 5 million ounces to 88 million ounces, signaling broad investor confidence.
- Valuation Opportunity: Gold equities remain 25% below their 2011 highs, offering room for capital gains as central banks continue to buy gold and inflation concerns linger.

This outperformance underscores a critical thesis: gold equities amplify macro trends. With the Federal Reserve's pause on rate hikes and geopolitical risks persisting, gold remains a hedge against uncertainty. Gabelli's ability to identify undervalued miners positions the fund to capitalize on this dynamic.

Utilities: A Safe Harbor with Hidden Growth Catalysts

While the S&P 500 stumbled, the S&P Utility Index (SPU) rose 4.9%, outperforming broader markets. Regulated utilities—those insulated from tariff risks and economic cycles—delivered an even stronger median return of 9.0%, driven by three key trends:

1. Electric Demand Surge:
2. Data centers, EV adoption, and manufacturing onshoring are fueling a 2.0–2.5% annual electricity demand growth, accelerating to 3–4% by 2028.

3. Utilities like American Electric Power (AEP) and NextEra Energy (NEE) are expanding infrastructure to meet this demand, with capital spending hitting a record $186.4 billion in 2024.

4. Policy and Regulatory Tailwinds:

5. The Trump administration's easing of environmental permitting and support for gas/nuclear power have boosted utility profitability.

6. The Inflation Reduction Act (IRA) retains its impact, with “safe harbor” provisions protecting projects already under construction.

7. Rate Base Growth and Dividends:

8. Utilities are targeting 5–9% earnings growth through rate base expansions (8–17% annual growth for some firms).
9. Yields of 3.4% and dividend growth of 5–7% annually make utilities a rare blend of income and growth.

Why Now? The Case for Immediate Action

Gabelli's success stems from its hybrid strategy: marrying defensive sectors with growth catalysts. Utilities and gold equities are not just safe havens—they're engines of value creation in their own right.

Investment Thesis:
- Utilities: With P/E multiples at 17x (reasonable for their growth trajectory) and a long runway for rate base investments, utilities offer a “win-win” in volatile markets.
- Gold Equities: Trading at discounts to historical highs, gold stocks could see a rerating as central banks continue to buy and ETF inflows persist.

Risks? Yes—but Manageable:
- Equity dilution from capital raises (e.g., AEP, ETR) and potential regulatory shifts are concerns. However, utilities' regulated ROEs and gold's macro-hedging role provide buffers.

Call to Action: Act Before the Crowd Catches On

Gabelli's Q1 results highlight a compelling opportunity to allocate to utilities and gold equities before broader recognition. Here's how to play it:

1. Utilities:
2. Focus on regulated names like AEP, NEE, and PPL Corp (PPL), which benefit from rate base growth and stable dividends.

3. Consider sector ETFs like XLU for diversified exposure.

4. Gold Equities:

5. Target mid-cap miners like Alamos Gold (AGI) and Kinross Gold (K), which outperformed in Q1.
6. Use the Gabelli Gold Fund (GABGX) to capitalize on active management expertise.

Conclusion: Defensive Growth is the New Alpha

In a market rife with uncertainty, Gabelli's hybrid strategy—pairing utilities' defensive traits with gold's inflation-hedging power—proves that sector-specific opportunities can thrive even in turbulence. With utilities and gold equities still undervalued relative to their growth potential, now is the time to position portfolios for resilience and returns.

Investors who act now may secure gains before these trends hit the mainstream.

Data as of March 31, 2025. Past performance does not guarantee future results.