Robert Maltbie, Jr. Stocking Up – Dances With Bulls, S&P to hit 1600 by year end

The stock market may look toppy to some, but one seer who took a contrarian bullish stance on the market last summer thinks it still has plenty of room to run. Robert Maltbie Jr., founder of Singular Research, a bottoms-up, research shop that focuses on small-caps, and owner of Millennium Asset Management, an institutional hedge fund near Los Angeles, thinks the Standard & Poor’s 500 Index could hit 1,600 by year end. That would be a nice 20% return for investors. Maltbie allows that it’s more of a stockpickers’ market, but adds that individual investors’ exposure to equities is at a “generational low” of 37% of all assets. A more typical percentage is 50%-plus. The manager, who was correctly bearish on Goldman Sachs, Washington Mutual and Bank of America during the meltdown, notes that while there are some indications of frothiness in the market, particularly new stock issuance and the ratio of insider selling to buying, other indicators that Singular uses to make its market calls such as earnings momentum and revisions, suggest a market multiple closer to 16. That’s far more robust than the current 14 multiple, based on earnings estimates of $95 a share for the S&P this year. Maltbie also thinks S&P earnings will come in at $100. Another possible lift to the market? Rising S&P dividends, where the 26% payout ratio is less than half the 54% historic average. He still likes small-caps, noting that 55% of all domestic equities with P/E multiples under 10 have market values of $500 million or less.

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