May 6 (Bloomberg) -- Birinyi Associates Inc., whose prediction the Standard & Poor’s 500 Index would reach 1,600 came true last week, purchased options betting on more gains.
Birinyi, among the first to advise buying U.S. stocks before the bull market began in 2009, said the S&P 500 may climb 18 percent to 1,900 should it conform to bull markets that began in 1982 and 1990. The Westport, Connecticut-based firm run by Laszlo Birinyi bought an unspecified amount of $170 calls on the SPDR S&P 500 ETF Trust, according to a report e-mailed to Bloomberg News today. They will become profitable if the S&P 500 gains more than 5 percent by December.
“In addition to the historical parallels, we still view sentiment as subdued and nowhere approaching extremes,” Birinyi, president, and Jeffrey Yale Rubin, an analyst at the firm, wrote in the May 3 report.
The S&P 500 has jumped 13 percent this year and added 4 percent since April 5, when a report showed employers in March added the fewest workers in nine months, less than the most-pessimistic forecast in a Bloomberg survey. The index rallied 2 percent last week to 1,614.42, an all-time high, and surpassed Birinyi’s previous target of 1,600 as earnings reports exceeded analyst estimates and home sales rose.
The exchange-traded fund that tracks the S&P 500 rose 0.1 percent to a record $161.47 at 11 a.m. New York time. The S&P 500 was little changed at 1,614.80. The December call contract on the ETF grants the right to buy 100 shares of the fund for $170.
Birinyi’s year-end forecast compares with the 1,601 average of 17 Wall Street strategists surveyed by Bloomberg, whose estimates range from 1,390 to 1,760.
The S&P 500 has gained 139 percent since March 9, 2009, led by consumer, financial and industrial stocks. The bull market is the biggest since an eight-year advance of 302 percent in the 1990s, according to data compiled by Bloomberg. Birinyi said in a Bloomberg Radio interview today that he expects the rally to last at least another 18 months.
“We still have too much reluctance,” he said. “As long as we have this steady progression and we don’t have too much exuberance, I think again 1,700 is the next stop.”
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