Tags: Birinyi | Bull | Market | Years

Birinyi: Bull Market May Last Several More Years

By    |   Monday, 12 March 2012 06:54 AM

We're in a protracted bull market that may last for several more years, investor pro Laszlow Birinyi told Fortune magazine.

"We're currently in the third leg of a four-leg bull market. The first and last phases are usually the most lucrative," said Birinyi.

Biriny's contrarian style has served him well. His privately managed accounts averaged 5.5 percent annual returns compared to 2.9 percent for the S&P 500 over the last 10 years.

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He now sees similarities between the current environment and 1982 when markets were just leaving a pessimistic period and the Dow increased from 777 to 1,000 in a matter of months. Like 1982, markets recently experienced a strong start following a very pessimistic period.

The fund manager told Fortune that he is encouraged when the mood in overwhelmingly negative. For instance, the longest stock market story in The New York Times in 2010 was a gloomy story with the headline, "Stocks Slide as Weak Reports Pile Up."

That was stock market bottom and stocks rose 22 percent in the rest of the year.

In short, negativity in the financial press is a buy signal, he said.

Birinyi dislikes financial stocks. They usually see most of their gains early in the bull market, and then do poorly later in the cycle.

When it comes to picking individual stocks, Biriny noted in the interview that some perform much better than others. In the fourth quarter of last year, 162 S&P stocks had returns of 50 percent or more than the index, while 95 had returns twice as high.

Other experts also believe stocks will continue rising.

"I think there's a good chance that by the end of this year the Dow will break its all-time high," said Jeremy Siegel, a financial historian at the University of Pennsylvania's Wharton business school, according to the Los Angeles Times.

Bull markets, Siegel says, typically follow bear markets like the one seen after the financial collapse. Plus, bulls believe more investors will turn to stocks because of low returns from bonds.

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