Laszlo Birinyi on the financial horizon
Laszlo Birinyi is a gentle, calm bull. “Our contention is that the market is in the midst of a protracted bull market, and we still think it has at least another year and probably more to go,” he said. A Southport resident, Birinyi operates far from the clanging crowd of Wall Street. We spoke on the phone from his office on Wilton Road, across from Save the Children. There, with the assistance of the seven-person team at Birinyi Associates, he runs a newsletter, a stock research business, and manages about $250 million. His dispassionate analysis of data and distinctive voice have made the veteran analyst a regular on financial television.
Birinyi’s optimism in recent years has also made him something of an outlier. He called a bottom on the stock market in late 2008—a few months too early. And despite the frequently horrid news flow—European crisis, war in the Middle East, a slowdown in China, political deadlock at home—Birinyi believes there’s more good news to come. “The negative case is always more articulate, because it is based on what you can see now,” he said. But the stock market looks ahead. “And the things that we look at suggest that the market is more comfortable going forward.”
Birinyi urges investors to look at internal data rather than the external noise. “I look at what is going on in the market. And that to me is where the rubber meets the road,” he said. In his view, the rise of homebuilder stocks and companies like Whirlpool, whose shares doubled in 2012, are more convincing evidence of a housing rebound than surveys of Realtors.
Following the numbers is tougher today than when Birinyi, a veteran of Salomon Brothers, set up his own research shop in 1989. One of Birinyi’s edges used to be analyzing money flows to determine investor interest in individual stocks. But high frequency trading—computers that execute thousands of trades per second—have played havoc with this data. Throw in overseas markets, derivatives, commodities, exchange traded funds, and the role of central banks, and “we have gone from playing checkers to playing chess.”
So what’s new for 2013? In employment and housing, the two most significant problem areas, the U.S. has turned a corner. Yes, tax changes are coming. But, Birinyi notes, “the market has a great ability to forecast and get around these things.” He noted, for example, that in late 2012, dividend paying stocks like Con Edison and Altria started to perform poorly, as investors anticipated that taxes on dividends might rise.
But with the current bull market nearly four years old, investors should focus more on individual stocks and less on groups of stocks. Birinyi notes a huge divergence with technology, with companies like Hewlett-Packard and Dell performing poorly while Apple and MasterCard (“most people don’t realize it is a technology stock”) are doing well. As for China, who knows? “I don’t have the arrogance to say that, sitting along the banks of Saugatuck, I know what the new regime is going to be planning.” Uncertainty is part of investing, as it is in life. Birinyi’s advice is to stay calm, carry on, and be humble. “Don’t leave the table, you can make money here. Do your work and be right on your stock selection and investments.”