March 23, 2010

Barton Biggs: We Can Rally Another 10%

Barton Biggs is still very bullish on stocks and expects this rally to extend another 10%. Biggs, whose flagship hedge fund returned three times the industry average last year, says stocks remain cheap relative to forecast earnings.

The S&P 500 is valued at 14.7 times 2010 profits, assuming earnings for companies in the index rise 27%, the average estimate from analysts tracked by Bloomberg. That compares with an average multiple of 16.6 over the last 56 years. Wall Street firms predict total income at S&P 500 companies will rise 50% in the next two years, the biggest increase since 1994, according to estimates compiled by Bloomberg. "I'm very struck by the level of bearishness everywhere I go," says Biggs, who predicts the next move in the S&P 500 will be a 10% to 15% gain. "I'm not obsessed with history. I'm bullish because I think the global economic recovery is on track and is going to be surprisingly strong. The world was falling apart in 2009. There's been a tremendous change."

Of course Barton Biggs is a perma bull and was bullish all the way down in 2007 and 2008.

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