Birinyi sticks to his guns, reaffirms eye-popping target for S&P 500

Famed stock-picker believes economy is on the improve; discounts recent market plunges

Laszlo Birinyi, among the first to suggest buying stocks as the market reached its bear-market bottom in March 2009, said he’s still bullish on U.S. equities even after the biggest decline of the year this week.

“While we may have stumbled for a day or two, I think the race is still on,” Birinyi said on Bloomberg Television’s “In the Loop with Betty Liu” today. He reiterated his call from last week that the Standard & Poor’s 500 Index (SPX) has the potential to reach a record high of 1,700 this year should economic growth surprise investors the same way falling bond rates did in 1995.

Recent declines in smaller companies don’t portend the rally is slowing, Birinyi said today. The Russell 2000 Index (RTY), an index of stocks with an average market value of about $725 million and considered by some investors to be an indicator of potential economic growth, fell 4.3 percent since Feb. 3 as of 10:29 a.m. New York time, while the S&P 500 was up 1 percent in the same period. He said the underperformance isn’t “troublesome” and recommended investors stay in equities.

“There’s always something that doesn’t fit the scenario,” said Birinyi, who founded the Westport, Connecticut-based firm Birinyi Associates Inc.

Stocks most tied to the economy, such as Caterpillar (CAT) Inc. and Salesfore.com Inc., are faring better this year than stocks considered safer during times of distress, such as McDonald’s Corp. (MCD), a sign to Birinyi that the equity market is forecasting a better recovery than economists suggest.

‘Very Good Things’

“The market is saying some very good things about the economy which no one has factored in,” he said.

Caterpillar shares are up 20 percent, while Salesforce.com has advanced 43 percent. McDonald’s is down 3.4 percent in 2012. Economists last month lowered their average forecast for U.S. gross domestic product growth in 2012 to 2.2 percent from a projection of 2.3 percent in January, data compiled by Bloomberg show. The world’s largest economy grew 1.7 percent last year and 3 percent in 2010.

The S&P 500 slid 1.5 percent on March 6, its biggest decline since Dec. 8, after a report showed Europe’s economy shrank and as investors watched developments in Greece’s debt restructuring. The index has recouped almost all of that loss, rising 0.5 percent to 1,359.14 today, as more investors agreed to Greece’s debt swap.

Should the index reach 1,700, it would represent a 26 percent climb from yesterday’s closing level of 1,352.63. The benchmark gauge for U.S. equities has gained 101 percent since the 12-year low on March 9, 2009.
–Bloomberg News–

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