No Wonder Goldman Continues to Climb

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.

Profit Estimates

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.

Comments

[Ferdinand E...:]

I hardly know what to say. When I informed the colleagues on SA that Goldman Sachs was a groovy bank, I collected a big pile of negative points. Work out Goldman Sachs! Show the mediocrities what investment banking is all about.

Sep 21 10:26 AM

[banco:]

I suppose Goldman Sachs is the same as "Government Sachs".

Sep 21 02:22 PM

[cove3:]

Take the investment banking out of the description of GS and replace it with speculation/manipulation banking. Very little of what GS does is aiding long term investment in value producing enterprices

Ron

Sep 22 09:47 AM

[Sol Rosenberg:]

Of course you can make money when you have access to unlimited capital courtesy of taxpayers. GS is just a massive hedge fund playing the USD carry trade with other people's money.

Sep 22 01:15 PM