Barton Biggs, the hedge fund manager who bought stocks when the market bottomed in March 2009, said he is bullish on U.S. equities and likes industrial shares even though the global economy has slowed.
"The U.S. and the global economy have clearly slowed pretty significantly," Biggs, who runs New York-based Traxis Partners LP, said in a radio interview with Tom Keene on Bloomberg Surveillance. "That's arousing the bears, who believe we're going to slip back into a long soft patch at best or maybe even a double-dip at worst," he said. "For a number of reasons I don't think that's right."
Biggs favors companies such as Caterpillar Inc. (CAT) and Deere & Co. (DE) because their earnings growth continues to exceed expectations and demand for farming and construction equipment remains strong.
"I don't see anything the matter with Deere and Caterpillar and the big American industrial companies, and in terms of valuation they're still very reasonable," he said.
The Standard & Poor's 500 Index climbed to an almost three- year high on the final trading day of April. It slumped 3.4 percent from that point through yesterday as economic data missed economists' estimates and investors prepared for the Federal Reserve to complete its $600 billion bond-purchase program, known as quantitative easing, at the end of June. The benchmark equity gauge rallied 4.8 percent from the end of 2010 through yesterday amid government stimulus measures and higher- than-estimated earnings.
Investor Reaction
Biggs, who oversees $1.3 billion, said last week that investors are overreacting to negative economic news such as the European debt crisis, housing and reduced stimulus from the U.S. Federal Reserve. Housing starts in the U.S. unexpectedly fell in April as flooding and tornadoes in the South shut down construction, the Commerce Department said May 17. Those issues will be resolved, while the U.S. market remains reasonably priced on an earnings basis for the next year.
"I still believe in emerging markets, particularly Asia," he said today. "China is going to be a terrific stock market in the second half of the year. China maybe has one or two more tightenings ahead."
The Shanghai Composite Index dropped for the fourth time today, losing 7.5 points, or 0.3 percent, to 2,767.06. The measure has lost 9.5 percent from the close of 3,057.33 on April 18, after earlier sliding as much as 10 percent, a level analysts say means the market has entered a correction.
'They Have Succeeded'
The Shanghai Composite, which tracks the bigger of China's stock exchanges, plunged 2.9 percent yesterday, erasing this year's advance of as much as 8.9 percent, after a manufacturing gauge fell to its lowest level in 10 months. China's preliminary manufacturing index, known as the Flash PMI, was at 51.1 in May, compared with the final reading of 51.8 in April, HSBC Holdings Plc and Markit Economics said yesterday. A number above 50 indicates expansion.
"It's apparent from the PMIs that came out yesterday that they have succeeded in slowing the economy very significantly," he said. "At the same time it's still a very dynamic economy. Now, is it going to grow 10 or 11 percent in real terms? No, it's not," Biggs said. "They're going to slow it down to 7 or 8 percent, but with a moderate inflation rate I don't see anything the matter with that and we can find a lot of attractive companies to own in China."
"The U.S. and the global economy have clearly slowed pretty significantly," Biggs, who runs New York-based Traxis Partners LP, said in a radio interview with Tom Keene on Bloomberg Surveillance. "That's arousing the bears, who believe we're going to slip back into a long soft patch at best or maybe even a double-dip at worst," he said. "For a number of reasons I don't think that's right."
Biggs favors companies such as Caterpillar Inc. (CAT) and Deere & Co. (DE) because their earnings growth continues to exceed expectations and demand for farming and construction equipment remains strong.
"I don't see anything the matter with Deere and Caterpillar and the big American industrial companies, and in terms of valuation they're still very reasonable," he said.
The Standard & Poor's 500 Index climbed to an almost three- year high on the final trading day of April. It slumped 3.4 percent from that point through yesterday as economic data missed economists' estimates and investors prepared for the Federal Reserve to complete its $600 billion bond-purchase program, known as quantitative easing, at the end of June. The benchmark equity gauge rallied 4.8 percent from the end of 2010 through yesterday amid government stimulus measures and higher- than-estimated earnings.
Investor Reaction
Biggs, who oversees $1.3 billion, said last week that investors are overreacting to negative economic news such as the European debt crisis, housing and reduced stimulus from the U.S. Federal Reserve. Housing starts in the U.S. unexpectedly fell in April as flooding and tornadoes in the South shut down construction, the Commerce Department said May 17. Those issues will be resolved, while the U.S. market remains reasonably priced on an earnings basis for the next year.
"I still believe in emerging markets, particularly Asia," he said today. "China is going to be a terrific stock market in the second half of the year. China maybe has one or two more tightenings ahead."
The Shanghai Composite Index dropped for the fourth time today, losing 7.5 points, or 0.3 percent, to 2,767.06. The measure has lost 9.5 percent from the close of 3,057.33 on April 18, after earlier sliding as much as 10 percent, a level analysts say means the market has entered a correction.
'They Have Succeeded'
The Shanghai Composite, which tracks the bigger of China's stock exchanges, plunged 2.9 percent yesterday, erasing this year's advance of as much as 8.9 percent, after a manufacturing gauge fell to its lowest level in 10 months. China's preliminary manufacturing index, known as the Flash PMI, was at 51.1 in May, compared with the final reading of 51.8 in April, HSBC Holdings Plc and Markit Economics said yesterday. A number above 50 indicates expansion.
"It's apparent from the PMIs that came out yesterday that they have succeeded in slowing the economy very significantly," he said. "At the same time it's still a very dynamic economy. Now, is it going to grow 10 or 11 percent in real terms? No, it's not," Biggs said. "They're going to slow it down to 7 or 8 percent, but with a moderate inflation rate I don't see anything the matter with that and we can find a lot of attractive companies to own in China."
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