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Goldman Sachs (NYSE:GS) is among the most profitable investment banks. Last year, the company earned $3.60 billion in advisory fees. This year, earnings are expected to grow by 46%, and long-term consensus earnings growth is 9.03%. With over $500 billion in current assets, Goldman Sachs is one of the largest institutional investors in the stock market. The investment titan offers 56 mutual funds managed by professional money managers. Thirty-nine of these funds invest in equity markets.

As of the 2011 second quarter, Goldman Sachs had a diversified portfolio of equities. Financial stocks constitute 33% of the holdings, followed by technology (17%) and consumer stocks (16%). Energy stocks constitute 11% of the holdings. According to J3SG, Goldman Sachs increased its ownership of 2278 stocks, while opening 212 new positions in the last quarter. I have examined the boldest 7 buys from a fundamental perspective, adding my O-Metrix Grading System where applicable.

Company Name

Ticker

Shares Held

% Change

% of TSO*

O-Metrix Score

Mosaic

MOS

6.26 million

2059%

1.41%

4.3

PPL Corp.

PPL

19.76 million

170%

4.09%

3.4

Emerson Electric

EMR

9.20 million

115%

1.22%

7.09

Merck & Co.

MRK

24.91 million

33%

0.8%

3.2

Xilinx Inc.

XLNX

28.60 million

16%

10.95%

7.02

Cabot Oil & Gas

COG

3.83 million

407%

3.70%

1.58

Accenture

ACN

6.42 million

90%

1.07%

4.86

*TSO: Total Share Ownership by Goldman Sachs.

Data obtained from Finviz/Morningstar and is current as of Aug.19

Mosaic, a David Tepper favorite, is also favored by Goldman Sachs. Goldman Sachs owns 6.26 million shares and increased its holdings by 2059% in the last quarter. Total share ownership stands at 1.41%. Mosaic is pretty popular among institutions. The institutions own 71% of the company. Top 10 institutions significantly increased their holdings in the last quarter.

While the company is doing well, the stock is falling off the cliff since mid-March. The year-to-date performance is -17.31%. Mosaic is a highly profitable stock with a gross margin of 31.41% and a net margin of 25.34%. It has no debt issues. Its current ratio is 3.47 and debt/equity ratio is 0.07. Analysts estimate 9% EPS growth for the next 5 years. Based on these estimates, Mosaic has an O-Metrix score of 4.3.

PPL Corporation is an electric utility corporation headquartered in Allentown, Pennsylvania. It also distributes natural gas to northeastern and northwestern customers. Goldman Sachs owns 19.76 million shares and increased its holdings by 170% in the last quarter. Total share ownership stands at 4.09%. PPL is a nifty dividend payer with a yield of 5.13%. It is a highly profitable company with a gross margin of 34.71% and a net profit margin of 13.21%.

The stock returned 6.47% since January. It is trading with a low trailing P/E ratio of 10.92 and a forward P/E ratio of 11.47. Analysts estimate 2.98% EPS growth for the next 5 years. Based on these estimates, PPL has an O-Metrix score of 3.4.

Emerson Electric is an industrial equipment company that services a large number of products from heating systems to wind turbines. Goldman Sachs owns 9.20 million shares and increased its holdings by 115% in the last quarter. Total share ownership stands at 1.22%. Emerson’s dividend yield is 3.25% and its trailing twelve month EPS is $3.02.

Analysts estimate EPS to reach $3.76 in the next year. Operating margin is 14.35% and net profit margin is 9.95%. The stock returned -24.26% since January. Its trailing P/E ratio is 14.06 and forward P/E ratio is 11.29. Analysts estimate 14.72% EPS growth for the next 5 years, which is possible given the 8.92% annual EPS growth in the past 5 years. Based on these estimates, Emerson has an O-Metrix score of 7.09.

Merck is among the top dividend stocks in the market with a yield of 4.86%. Goldman Sachs owns 24.9 million shares and increased its holdings by 33% in the last quarter. Total share ownership stands at 10.95%. The stock lost almost 14% in the last month and year-to-date return is -5.22%. The stock has a relatively low Beta value of 0.72.

UBS has a target price of $42. Analysts' mean target price is $39.60, implying almost 30% upside potential in the near-term. However, the stock is trading with a trailing P/E ratio of 22.65 and a forward P/E ratio of 8.12. EPS is estimated to grow by 4.81% for the next 5 years. Merck has an O-Metrix score of 3.2.

Xilinx is a semiconductor company based in San Jose, California. The company designs, develops, and markets advanced programmable platforms. Goldman Sachs owns 28.6 million shares and increased its holdings by 16% in the last quarter. Total share ownership stands at 10.95%. The company is doing well. However, its performance is under appreciated by the market.

As of Aug 19, the stock was trading with a P/E ratio of 11.97 and a forward P/E ratio of 11.48. It pays a nifty yield of 2.68%. Analysts estimate 13.70% EPS growth for the next 5 years, which is conservative given the 19.14% EPS growth of the past 5 years. Xilinx has an O-Metrix score of 7.02.

Cabot Oil & Gas Corporation is an independent oil and gas company, headquartered in Texas. It holds significant reserves in the Appalachian and Rocky Mountain areas, as well as Anadarko basin in Texas. Goldman Sachs owns 3.83 million shares and increased its holdings by 407% in the last quarter. Total share ownership stands at 3.7%.

The stock is in a strong momentum for the last 2 years. It returned 128% in a year and 76.26% since January. However, the valuation is too high. It is trading at a trailing P/E ratio of 57.9 and a forward P/E ratio of 23.78. Dividend yield of 0.18% is negligible. 5 Year annualized EPS growth forecast stands at 13%. Based on these estimates, Cabot has a poor O-Metrix score of 1.58.

Accenture is a diversified management consulting company, headquartered in Dublin. It also offers technology and outsourcing services around the globe. Goldman Sachs owns 6.42 million shares and increased its holdings by 90% in the last quarter. The stock was doing fine until July. However, it collapsed from $64 to $47 in the recent sell-off panic.

The year-to-date return is -11.51%. As of Aug 19, the stock was trading with a P/E ratio of 15.06 and a forward P/E ratio of 12.58. It offers a yield of 1.9%. Analysts estimate an annualized EPS growth of 11.23% in the next 5 years. Based on these estimates, Accenture has an O-Metrix score of 4.86.

Find more information on O-Metrix Grading System here.

Source: 7 Big Buys by Goldman Sachs