Shares of The Goldman Sachs Group, Inc. (GS) closed at $167.21 on Dec 6, recording a year-to-date return of 28.7%. Impressive organic growth, strong capital deployment activities, strategic business diversification and continuous improvement in expense management were the driving forces behind this growth story. Hence, keeping its shares in your portfolio should not disappoint.
However, we are not very confident that these positive factors will translate into further price appreciation going forward as a sluggish economic recovery and stringent regulatory requirements would put considerable pressure on its top line. Consequently, adding more shares of Goldman to your portfolio may not be a good idea.
Why This Stance?
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
Goldman’s third-quarter 2013 earnings per share outpaced the Zacks Consensus Estimate. Results reflected declining total expenses and a strong capital position. However, a fall in the top line was the headwind for the quarter.
Goldman’s stable capital position allows it to deploy capital meaningfully. The company not only has a share repurchase program in place, but also hikes dividend to enhance shareholder value. On Oct 17, the company declared a 10% hike in its quarterly dividend.
However, unfavorable macroeconomic issues are expected to reduce client activity, thereby affecting revenues from the Investment management division of the company.
The company has seen a mixed track record when it comes to estimate revisions and the Zacks Consensus Estimate has not been in trend either. As a result, the company currently carries a Zacks Rank #3 (Hold). Over the last 60 days, the Zacks Consensus Estimate for 2013 remained almost flat at $15.06 per share, while for 2014 it declined roughly 1% to $15.26 per share.
Other Stocks to Consider
If you are interested in the finance sector, you may consider a few better-ranked stocks like First Interstate Bancsystem Inc. (FIBK), German American Bancorp Inc. (GABC) and Mainsource Financial Group (MSFG). All these stocks carry a Zacks Rank #1 (Strong Buy).