Feb. 11 (Bloomberg) -- Barton Biggs, co-founder of hedge fund Traxis Partners LLC, said he's ``gradually increasing'' his holdings of U.S. equities because he doesn't expect a recession and shares are ``very, very cheap.''
Biggs, the former global investment strategist for Morgan Stanley, said in a Bloomberg Television interview that the market is ``at or very close to an important bottom'' and may be led higher by banks and brokerages when a rally occurs. Some financial companies may advance 20 percent to 25 percent over periods of two to three weeks, said Biggs, who helps manage $1.5 billion in Greenwich, Connecticut.
The Standard & Poor's 500 Index fell 6.1 percent in January, its biggest monthly decline since September 2002 and its worst start to a year since 1990. During the month the index fell as much as 16 percent from its Oct. 9 record.
Financial companies in the index fell almost 21 percent in 2007, the worst performance among 10 industry groups and their biggest drop since 1990. They trade for 14.8 times profits, compared with an average price-earnings ratio of 15.5 this decade, according to data compiled by Bloomberg.
The S&P 500 trades for 18.1 times earnings, 31 percent below its monthly average this decade, according to data compiled by Bloomberg.
Biggs correctly forecast U.S. equities would rebound from declines in March and August last year. On March 16, following a 5 percent decline by the S&P 500 from its Feb. 20 peak, he said stocks were approaching a bottom and predicted a gain of as much as 15 percent for the index in 2007.
The S&P 500 rose as much as 12 percent from that level before retreating to end the year with a 3.5 percent gain.
On Aug. 16, after a 9 percent decline by the index, Biggs said it was bottoming and predicted a rebound. The benchmark rose almost 11 percent over the next seven weeks.