Birinyi Says Fireworks Are In The Offing As Earnings Beat Estimates Early In Lucky 2013

Tuesday, January 22, 2013 08:04
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Birinyi Says Fireworks Are In The Offing As Earnings Beat Estimates Early In Lucky 2013

Tags: economy | markets | S&P

So far, the number 13 in 2013 is proving to be a lucky one. With 72% of companies beating earnings estimates, the rally in the equities markets is likely to catapult them to record levels.
 
It’s the biggest expansion of profits since the dot.com bubble of the 1990s. The S&P 500 index is only 5.1% below its record high reached in October 2007.

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Last week it reached a five-year high as 48 out of 67 companies that reported earnings solidly beat estimates.
 
Laszlo Birinyi began buying stocks four years ago. He’s still so confident that individuals will finally return to the market that he’s bought call options on the S&P in a bet that it will climb 8% this year.
 
He says the last phases of bull markets are very strong—that this is where the fireworks begin.
 
The price-earnings ratio hit 33 at the peak of the dot com bubble in early 2000. Earnings today are almost double what they were then but at only about half the valuations.
 
Earnings have come back much faster than the economy because companies cut costs and took advantage of the low interest rate environment.
 
The difference between now and 2007 is that these earnings are coming off of a non-leveraged economy, not a highly leveraged one like in 2007.
 
Flows into equity funds are the strongest since 2000, the economy continues to improve, and consumers are starting to spend again. Looks like it could be a very good year.

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