I sold my Goldman Sachs (GS) shares about two weeks ago after a decent gain and moved the funds into the more diverse SSO ETF. But I am now kicking myself as Goldman continues to rally to new highs and analysts upgrade their expectations for the dominant investment bank.
Past Quarter Performance
Goldman Sachs has rallied over the past six months from near $90 a share to now over $175 a share with a recent burst from the $160 range. This rally has occurred as profits have improved steadily and analysts have upgraded the company’s expectations for future quarters. The company has beat expectations the past two quarters after having a terrible November 2008 report. But the turnaround has been quick and explosive. They fell to a $5 loss per share in November of 2008 to only turn around and report a $3.39 profit in March and then an even better $4.93 profit in June. And now analysts are steadily increasing their expectations for September, December, and the current year.
Estimates for the current quarter have risen over the past 3 months from $2.59 a share in profit to a recently adjusted $3.62 profit. Likewise the following quarter has improved expectations from $3.25 a share to $4.43 a share. Plus the stock is trading around a price to earnings (P/E) ratio of 39 with these two quarters growing at 100% and 189% respectively. No wonder the stock continues to move higher.
Goldman Sachs Trade
I think you can be long Goldman up until the next earnings release and even hold the position through the release with some put protection in place. The Wall Street Journal reported last Monday that Goldman led all stocks in selling into strength so you should wait for a pull-back and begin to build a position as the stocks sells off slightly.