Barton Biggs, who recommended buying U.S. stocks when the Standard & Poor's 500 Index started rallying in 2009, said riots in Egypt are no reason to sell.
The S&P 500 slumped 1.8 percent on Jan. 28, the most in five months, after intensifying unrest in Egypt overshadowed an acceleration in American economic growth. President Hosni Mubarak, facing protests calling for his ouster, replaced his Cabinet and named Samir Radwan, a former senior economist at the International Labor Organization, as finance minister.
“I'm not selling, and I'm not panicked by these events in Egypt and the Middle East,” Biggs, 78, who runs New York-based hedge fund Traxis Partners LP, said in a Bloomberg Television interview today on “Surveillance Midday” with Tom Keene. “The ongoing economic data is very encouraging.”
U.S. equities rose today, extending the second straight monthly gain for the S&P 500, as businesses expanded at the fastest pace since 1988 and consumer spending beat estimates. A gauge of consumer spending in the U.S. climbed more than forecast in December, capping its strongest quarter in more than four years. The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 68.8 this month.
Biggs, who said at the beginning of September that investors who had avoided stocks should buy, reiterated that he's betting on the largest companies. The S&P 500 posted its biggest September-and-October rally since 1998 and the largest December advance since 1991.
“There isn't any question that the real values in this market are in the big, high-quality, multinational companies,” Biggs said today. “The small-cap indexes have had a huge move. I would definitely be betting against them.”
Smaller U.S. companies rallied the most since 2003 relative to the S&P 500 last year. The Russell 2000 Index rose 25 percent in 2010, beating the S&P 500 by 13 percentage points. The return left the benchmark gauge for American equity at the lowest valuation ever compared with the small-cap measure, according to data compiled by Bloomberg.
Earnings at the 321 companies in the Russell 2000 that reported quarterly results since Jan. 10 have missed analysts' estimates by 7.8 percent, according to data compiled by Bloomberg. Profits at the 187 companies in the S&P 500 that reported topped projections by 7.3 percent, the data show.
Biggs said earnings at S&P 500 companies may rise to $100 a share this year. That compares with the $93 median estimate of 12 strategists surveyed by Bloomberg News.
The S&P 500 has climbed 23 percent since Federal Reserve Chairman Ben S. Bernanke said on Aug. 27 that he would take action to boost the economy. The Fed this month kept plans to buy $600 billion of Treasuries through June, indicating the recovery still needs stimulus to produce a bigger reduction in unemployment.
“You just got to hope the good old stock market is smart and perceptive and that the stock market is seeing and saying that what Bernanke is doing is going to work,” he said.