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Reluctant Bulls Key for Birinyi Amid Record S&P 500 Rally

*from www.bloomberg.com, Mar. 29, 2013 (To view original article click here.)

Take Away #1: The S&P 500 Index (SPX)’s record rally probably has another year to go as investors give up their pessimism and buy, according to Birinyi.

Key Facts and Figures:

  • Laszlo Birinyi, president of Birinyi Associates Inc., was one of the first money managers to tell clients to buy before the bull market began.
  • “As long as you have this sort of hesitancy or reluctance instead of acceptance, the positive case is still very much intact”, Birinyi said.
  • “Don’t go looking for the exit. Leave the door open for a good year, because that’s one possibility that I do not hear,” said Birinyi.

Take Away #2: Birinyi advised clients to purchase shares before March 2009, when the S&P 500 reached a 12-year low.

Key Facts and Figures:

  • Since then, the S&P 500 is up 132%.
  • The S&P 500 rose 0.4% to 1,569.19 yesterday, exceeding its previous record from October 2007.
  • The S&P 500 has recovered losses from the financial crisis that wiped more than $10 trillion from U.S. market value.
  • Companies with earnings most-tied to the economy such as retailers, computer makers and banks have led the advance.
  • Makers of home products such as soap and drugmakers are up the most in 2013.

Take Away #3: Even with the rally, share volume on all U.S. exchanges has declined for four straight years.

Key Facts and Figures:

  • At less than 6.4 shares a day, volume is the lowest since at least 2008, according to Bloomberg.

Take Away #4: S&P 500 profits are expanding for a third year and the U.S. Federal Reserve is committed to continuing its unprecedented economic stimulus.

Key Facts and Figures:

  • The Fed pumped more than $2.3 trillion into the economy through monetary easing since 2008 sending treasury yields to record lows last year.
  • Per share earnings are projected to reach $109.40 this year, compared with about $62 in 2009.
  • While profit estimates are set for a record, growth slowed last year to 8.1% for the fourth-quarter compared with the 28% average of 2010 and 2011.
  • Analysts also cut their projections for the first quarter to a contraction of 1.8% from growth of 1.2% at the beginning of the year.

Take Away #5: Defensive groups are leading the market to all-time highs, which may suggest that the rally may be getting a little tired.

Key Facts and Figures:

  • Health-care stocks and consumer staples shares leading the rally also signal the advance in the S&P 500 may slow, says Jeffrey Kleintop of LPL Financial Corp.
  • “We may see something like we’ve seen in the last few years – a pull back starting in April,” says Kleintop.
  • In the four years since the bull market started, the S&P 500 nearly entered a bear market twice.
  • The benchmark lost 16% over two months in 2010 and 19.4% in about five months in 2011.
  • Both declines began in April, but recovered both times as the Fed committed more quantitative easing to boost the economy.
  • The S&P 500 Index ended the fourth-quarter with a gain of 10%, its best performance in a year.
  • Stocks will continue to advance as investors who previously shunned shares capitulate and buy, Birinyi said.

Take Away #6: Still, more gains in the S&P 500 are predicted this year.

Key Facts and Figures:

  • The average year-end prediction of 17 Wall Street strategists surveyed by Bloomberg is for the S&P 500 to hit 1,583.
  • The index’s advance since 2009 already exceeds the average bull-market return of 120%, Birinyi data show.
  • Two of the last nine cycles have rallied more: the 302% gain in the 1990s and 229% in the 1980s.
  • Stocks will continue to advance as investors who previously shunned shares capitulate and buy, said Birinyi.
  • Birinyi predicted in January that the S&P 500 has a more than 50% chance of climbing past 1,600 this year.
  • The U.S. equity benchmark would have to climb almost 2% to reach that level.

Take Away #7: The S&P 500’s record come about three weeks after the Dow Jones Industrial Average exceeded its previous high on March 5.

Key Facts and Figures:

  • Since then the 30-member gauge has advanced 2.3%, led by Hewlett Packard Co. and Boeing Co.
  • While investors poured $14.1 billion into equity mutual funds last month, the amount compares with $20.2 billion added to bond funds.
  • More than $600 billion was drained from stock managers in the six years through 2012.
  • Wyndham Worldwide Corp., CBS Corp. and Tenet Healthcare Corp. are among six stocks that have added more than 1,000% since March 2009.
  • For 2013, Netflix Inc. (NFLX) has gained the most, more than doubling since the start of the year.
  • Best Buy Co. and Hewlett-Packard are up more than 67%.

*To view original article from www.bloomberg.com click here.

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