Financial Winners May Need to Be Sold After Gains, Birinyi Says

By Eric Martin and Matt Miller

Aug. 7 (Bloomberg) -- Investors should consider selling some financial stocks after they surged during the past three weeks, said Laszlo Birinyi, president of Birinyi Associates Inc.

``You should look at the individual banks and realize that in the intermediate term, from now until the end of the year, they're going to struggle to make gains,'' Birinyi, who oversees more than $350 million in Westport, Connecticut, said in an interview on Bloomberg Television. ``If you've made 10 percent in a stock in a month or two months, you've basically gotten a year's gain in 15 percent of a year's time.''

The investor said he is short selling Avon Products Inc., betting that the world's largest door-to-door cosmetics seller will slump. Birinyi said he favors shares of oil drillers and Apache Corp., an oil and gas producer.

The investor correctly predicted in October that financial shares would tumble. Birinyi's warning preceded a 34 percent plunge in the Standard & Poor's 500 Financials Index, spurred by writedowns and credit losses stemming from the subprime-mortgage market's collapse that exceeded $493 billion worldwide. On July 14, Birinyi said investors should avoid most financial companies because their shares will probably keep declining. The group went on to surge 25 percent.

U.S. stocks rose yesterday, sending benchmark indexes to a six-week high, as better-than-estimated earnings at Cisco Systems Inc. spurred a rally in technology shares and falling gasoline inventories boosted fuel refiners. The S&P 500 declined 22 percent from its October record through July 15, and has since advanced 6.1 percent.

Birinyi said June 26 that buying and holding U.S. stocks is ``very treacherous'' because share prices are swinging too much. He reiterated that view today.

Birinyi worked more than 10 years on the trading desk at Salomon Brothers Inc. before starting his research and money management firm in 1989. He is known for pioneering money flow analysis, which compares the dollar amounts moving into or out of a stock or index to establish whether it is being more aggressively bought or sold.

To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Matt Miller in New York at mtmiller@bloomberg.net.