Goldman Sachs Portfolio Strategy Research’s “US Weekly Kickstart” published June 23rd highlights stocks that still offer value even in the midst of a historic bull market. GS analysts David J. Kostin et al identify “15 stocks with higher growth, lower valuation and better yield than peers.”
Goldman expects bull market to run for two more years
The GS analysts premise their search for value stocks in the belief that the current positive macroeconomic background for equity markets will continue for at least the next two years. “We continue to expect the S&P 500 (INDEXSP:.INX) to grind higher over the next 2+ years as earnings continue to grow and roll-forward our 12-month price target to 2000 with targets of 2100 in 2015 and 2200 in 2016.”
Bull Market: Cyclicals to outperform defensives
Kostin et al. argue that the positive macroeconomic background will lead to GDP expansion, improved corporate earnings and a continuing bull market. They point to strong results from FedEx (FDX) and the company’s sanguine guidance on forward business activity as “consistent with our macro view.” The report also mentions that new export orders, which typically front run airfreight demand by two months showed a large improvement in April and May after a soft first quarter.
Goldman’s list of 15 value stocks for today’s bull market has a “significant tilt” toward cyclicals, given that it comprises five Consumer Discretionary stocks (Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Lowe’s Companies, Inc. (NYSE:LOW), Whirlpool Corporation (NYSE:WHR), GameStop Corp. (NYSE:GME)) and five Materials companies (The Dow Chemical Company (NYSE:DOW), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), International Paper Company (NYSE:IP), Nucor Corporation (NYSE:NUE), and Avery Dennison Corp (NYSE:AVY)).
In terms of sector recommendations, the GS analysts say they remain Overweight on Information Technology, Industrials and Consumer Discretionary, and Underweight Consumer Staples, Telecom Services and Utilities.