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

Bull Market Cyclicals

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)).

Sector recommendations

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.

Selected value stocks

Bull Market S&P 500

Kostin et al. highlight that their selected “value” stocks trade at “an 25% forward P/E discount vs. the S&P 500 median stock (13x vs. 17x), offer 60% faster 2015E EPS growth (19% vs. 12%), and have 90 bp higher dividend yield (2.7% vs. 1.8%).” However, the analysts also point out that despite their stronger growth and higher yield, “10 of the 15 stocks have lagged the S&P 500 YTD in 2014, a possible reason for their attractive valuation.”