Investing Ideas From Goldman Sachs

Regardless of the current public perception of Goldman Sachs, one can not deny the fact that they are a money making machine. It was just reported that they made money trading in every single day of the first quarter, among a few other firms. They have more often than not, been on the right side of many trades. Investors have great admiration for the research and analysis that has come out of this firm, due to their renown accuracy. One of those areas that is highly respected is the Goldman Sachs Conviction Buy List.

Goldman's Sachs' Conviction Buy List is a listing of stocks the investment banks research team expects to outperform. Goldman's Sachs' regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return. (from goldmansachs.com)

It would be fitting to base investing ideas to align with this list. According to the Street Insider:

Goldman Sachs added U.S. Steel Group (NYSE: X) to their Conviction Buy List with a $73 price target, representing 33% upside. The firm notes global steel production is approaching the peak seen in mid-2008 and inventories in the US remain at historically low levels. They see recent weakness as a good entry point.

Goldman Sachs added PepsiCo, Inc. (NYSE: PEP) to its Conviction Buy list with a $76 price target, representing 17% upside. The firm is recommending buying shares ahead of EPS reaccelerating to high-teens in 2H10, versus 5-6% in 1H10. The firm also sees 13%-14% EPS CAGR over the next few years, which the said is "best in class" among large-cap Staples.

Goldman Sachs upgraded McKesson Corporation (NYSE: MCK) from Neutral to Buy and added the stock to its Conviction Buy list and raised their price target from $70 to $80. The firm said McKesson offers the best risk/reward among Big 3 Distributors. The firm noted the overhang from FY11 guidance is behind us, recent underperformance and valuation at a 6% discount to the group.

Goldman Sachs upgrades Boeing from Neutral to Buy and adds the stock to its Conviction Buy List with a $90 price target. The firm said Boeing spans nearly every positive global theme: "BRICs exposure, credit normalization, a product story, the consumer recovery, favorable industry structure, and favorable company-specific dynamics." The Boeing Company designs, develops, manufactures, sells, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide.

An addition to the recent updates to their coveted list, they have made some extremely bold calls in face of much uncertainty.

“Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 44% increase in 2010 to $82, and an 18% increase in 2011 to $97.
Valuation Top-down, the S&P 500 trades at an NTM P/E of 14.0X (13.4X on pre-provision EPS). Bottom-up, it trades at an NTM P/E of 13.3 X and LTM P/B of 2.3X.”

They are still maintaining their S&P price target of $1300 for mid year/$1250 for year end and shrugging off the possibility of European woes preventing US growth. They believe the problems that we are facing are offset by the market's low valuations, improving  earnings, strengthening in the labor market and impressive ISM numbers.

Source: TPC, Street Insider, Goldman Sachs


Do not rely solely on the opinions of this blog or any other site when making an investment decision. Any investment could result in the risk of loss of capital. Please consider seeking professional advice before initiating your investment ideas. Disclosures: Long BAC Long C Long F Long DNDN Long GLW Long SPF, Long BP