It's been one heck of a year for stocks. Between the market's bottom on March 9 of last year and yesterday, the S&P 500 index gained 69%. That's pretty impressive, but in a couple months' time could we be looking at a near 95% jump from that trough?
That could very well be the case if market expert Barton Biggs is correct. In a Bloomberg interview yesterday, Biggs said that he's bullish on American equities and thinks gains of 10% to 15% could be in store for the next couple of months.
Biggs the big shot
For those not familiar with Barton Biggs, this isn't some random guy off the street throwing in his two cents. Biggs runs the multibillion dollar Traxis Partners hedge fund, which from its 2003 inception through June of last year was smashing the returns of both the S&P 500 and the MSCI All Country World indexes.
Biggs was also the former chief global strategist for Morgan Stanley, a member of the Barron's roundtable, a 10-time "All-American Research Team" pick by Institutional Investor magazine, and one of the few optimists when the clouds were gathering this time last year.
Hedging his bets
It's also notable that Biggs isn't some starry-eyed optimist who says everything is going to be cupcakes and lollipops because he likes to see people smile. In his book "Wealth, War and Wisdom," Biggs draws on history and highlights the real possibility of civil unrest and disaster, and goes as far as to suggest that the wealthy protect themselves by buying some farmland and stocking it with "seed, fertilizer, canned food, wine, medicine, clothes, etc."
While the two views -- civil unrest and a continued bull market -- may seem wildly divergent, I don't think they're all that tough to marry. In essence, Biggs is highlighting what he sees as the highly likely scenario -- more gains for equities -- while making sure to keep an eye on the low likelihood, but not impossible outcome, of a total civil unraveling.
In a similar way, I see a high likelihood that my good health continues for the foreseeable future, yet I still pay for a high-deductible health insurance plan in case an unlikely, but terrible health problem arises.
Getting on the Biggs bandwagon
While his Bloomberg call suggests that investors could do well by just jumping into U.S. equity indexes, he has also gotten a bit more specific on where he sees the best opportunities.
Large-cap multinationals are one of his favorite ideas in the current market. According to Business Insider, Biggs thinks that large-cap multinationals are the cheapest they've been in 30 years -- which should be music to the ears of any value investor. Zeroing in further, he is keen on big-cap technology names such as Microsoft (Nasdaq: MSFT ) , Intel (Nasdaq: INTC ) , Cisco (Nasdaq: CSCO ) , and Oracle (Nasdaq: ORCL ) . Outside of tech, he's keeping an eye on anything with strong exposure to emerging markets.
It's those emerging markets, though -- particularly in China and India -- that Biggs thinks could be the best performers worldwide. As of December, roughly 10% of Traxis' equity portfolio was investing in the iShares FTSE/Xinhua China 25 Index Fund, an exchange-traded fund heavy in huge China stocks like China Mobile (NYSE: CHL ) , China Construction Bank, and China Life Insurance.
Based on data from Capital IQ, though, it seems like Traxis is mostly sticking with the large multinational theme when it comes to individual stocks. Here are a few of the fund's top individual stock holdings:
|
Company
|
Market Cap
|
% of Traxis Portfolio
|
|
CEMEX (NYSE: CX )
|
$10 billion
|
2.1%
|
|
Cisco
|
$150 billion
|
1.5%
|
|
Johnson & Johnson (NYSE: JNJ )
|
$177 billion
|
1.4%
|
|
Merck
|
$115 billion
|
1.3%
|
|
Microsoft
|
$253 billion
|
1.2%
|
Source: Capital IQ, a Standard & Poor's company, and Yahoo! Finance.
The Biggs bottom line
Biggs' current view may not be as simple as a Jim Cramer "buy, buy, buy!" but we can still probably boil it down to a few easy-to-act-on points:
- American equities overall could tack on another 10% to 15% in the coming months.
- Multinational large-caps are bargains.
- Growth in Asian emerging markets makes those areas attractive.
- Catastrophic disaster isn't out of the question, so it wouldn't hurt to be prepared.
Now that you know where Barton Biggs stands, let's hear what you have to say. Is he on point or out in left field? Scroll down to the comments section and weigh in.
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