Investment Strategist Birinyi Sees 20 Percent Market Upside in 2013

There are many negative assumptions being made about the market, but Laszlo Birinyi, president and founder of Birinyi Associates, thinks that based on historical trends, this rally could be better than people think. With a potential upside of 20 percent, he expects the S&P 500 to hit 1600 this year.

"This is a stock market rally, where people are looking at stocks," he said Thursday on "Squawk on the Street." One stock Birinyi believes "encapsulates everything" in the market currently is Berkshire Hathaway, which is up year-to-date. "That tells me it's not just the retail investor, it's not short covering, it's not high frequency trading. It's real buyers buying real stocks," he said.

Birinyi's team has compared the current market to two other protracted periods of recession and said the market is at "a very interesting point" relative to those two historical periods, which included 1982 and 1990. "We're not suggesting they'll be parallels, but don't close the door on this idea. ... The market at this point at previous times has had some very good news. We talk about all the bad things that could happen. Good things could happen too."

While noting a correction is possible, he did not call one. "We have to take everything one step at a time, but I think that everything is all a 'go' right now," he said.

"We have a 55 percent chance of hitting 1600 (on the S&P) this year. I am long the December 160 S&P calls," he said, disclosing a bullish position in options on the S&P 500.

Birinyi also suggested investors consider industrials and cyclicals, such as consumer discretionary stocks and equities exposed to manufacturing.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul