Before Lazlo Birinyi opened his Westport, Connecticut research and asset-management firm in 1989, he honed his skills at Salomon Brothers on a trading desk run by Michael Bloomberg. Today, he manages $325 million, mostly for high net worth clients. Since 2009, he has returned an average of 12.4% per year (versus 16.9% for the S&P 500). Mr. Birinyi shared some thoughts on the market during a recent interview with Barron’s:
Is he perpetually bullish? He says not exactly. He anticipates major inflection points in market activity and thinks in concrete terms when looking at trades. “If a trader says you should trade a stock at 10 ¼ or 10 ½, you can’t say, ‘Let me get back to you.’ When we’re positive, it’s more that the market might do better.”
In August 2015 when Birinyi suggested that the S&P would hit 3,200, he said it was not meant as a prediction but rather as encouragement to investors to consider the possibility. He said, “We meant don’t presume it will happen, but don’t give up.”
Birinyi expects new highs in the S&P this year. But, he says, “we no longer have a steadily rising market, so I don’t have a target.” He believes it could be a good year with some “judicious” stock picking. “There are lots of concerns” he believes, including economic, technical and political. However, he says the market is only 5% from an all-time high. “There is underlying strength.”
Stock market research is important, he says, because it “overwhelms the argument. We have a unique database of magazine covers, newspaper clippings, and web stories with which we can double-, triple- and quadruple- check historic trends.” However, he questions the significance of sentiment indicators. “The weekly sentiment indicator published by the American Association of Individual Investors is not statistically useful,” he notes, adding that only between 100 and 300 of the 15,000 members actually respond.
With regard to individual stocks, Birinyi says his fund looks at situations where there are earnings upgrades or the like. But on oil stocks he says, “We are not enamored.” A longtime fan of Apple, he still holds stock in the company but says, “We are lightening up” and using gains to offset some first quarter losses and avoid capital gains.