Five companies highlighted by fund manager Laszlo Birinyi as poised to gain in 2012 have returned more than four times as much as the Standard & Poor’s 500 Index.
General Motors Co. (GM) has risen 20 percent this year after U.S. vehicle sales rose more than analysts estimated. Research In Motion Ltd. (RIM), maker of the BlackBerry smartphone, climbed 12 percent on speculation it hired a strategic adviser. Hermes International (RMS) increased 9.4 percent, People’s United Financial Inc. (PBCT) gained 6.3 percent and BlackRock Inc. (BLK) rallied 4.7 percent.
Birinyi, who advised holding stocks in August as the U.S. government was stripped of its AAA credit rating and strategists cut forecasts faster than any time since the credit crisis, said American equities may jump about 8 percent this year, if history is any guide. His five picks have so far appreciated more than 10 percent on average, compared with a 2.5 percent advance in the benchmark index.
“We still think you can make money,” Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, said in a phone interview today. “I’ve seen opportunities in stocks that aren’t a function of the overall market. These are five stocks that can be the basis of a portfolio that someone can put on the shelf and not have to worry about in a week or a month.”
Stock pickers have had more opportunities in 2012 to find companies that are beating the market. While developments in Europe’s attempt to tame its debt crisis led stocks in the S&P 500 last year to move more in tandem than any time in the past, the link between shares and the full index has been weakening.
The 50-day correlation of S&P 500 stocks to gains or losses in the gauge increased to a record 0.86 in October, according to data compiled by Birinyi Associates. A level of 1 would mean all 500 stocks moved together. Correlation was 0.77 yesterday, the data showed.
“Within asset classes you have some opportunities,” Birinyi said today. “With the overall market so concerned about things like Europe especially, I want to look for stocks that don’t have a whole lot of European effect, so they may not have the correlation that the overall market has.”
GM, the world’s largest automaker, is trading at 6 times reported earnings, even after its 20 percent rise this year. The Detroit-based company has beaten analyst earnings estimates for the past four quarters, data compiled by Bloomberg show.
“It’s really a fundamental story, I guess you could call it, for GM, and I think people have really missed it,” he said.
Birinyi cited Research in Motion’s patents and BlackRock’s exchange-traded funds as reasons for selecting the stocks. Hermes was one of the five stocks Birinyi recommended for 2011.
The Paris-based company rose 47 percent and increased earnings 30 percent last year, data and analyst projections compiled by Bloomberg show. Birinyi said he kept the stock this year partly for contrarian reasons as 14 of the 19 analysts who cover the company have a “sell” rating and four recommend holding it, Bloomberg data show.
Birinyi, an equity trader at Salomon Brothers Inc. in the 1980s, was one of the first investors to recommend buying when stocks bottomed in 2009. He stayed bullish through the S&P 500’s decline of 16 percent in 2010 and last year’s tumble to 1,099.23 on Oct. 3 from 1,363.61 on April 29.
U.S. equities are in the third of four bull-market stages, in which investors accept the rally that gathered momentum in the first two, according to Birinyi’s analysis. He said this phase, which started around July, should end in 2012 with a gain of at least 8 percent. The bull market’s final phase of “exuberance” has lifted the S&P 500 an average of 39 percent in the five advances since 1962, he said.
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