By Vitus Vrynn
In many ways, Goldman Sachs (GS) has been surrounded in fire the past few years, but there is still quite a bit of value in the company. Goldman Sachs was one of five mortgage servicers involved in the $25 billion settlement regarding poor loan/foreclosure practices, and that naturally indicates that the company has been in a fairly tough spot for a while. It's a huge loss, but it has only dwindled reserves, as opposed to directly causing them to lose subsidiaries, like it has with Morgan Stanley (MS).
As for what is current, it looks like Goldman Sachs has a huge success in the US Appeals court against Landesbank Baden-Wurttemberg, a German bank that sought compensation from Goldman Sachs because of the housing market implosion. From what I gather, it seems like the appeal will fail, and Goldman Sachs won't face too much loss, if any. This example serves as a kind of indicator for the climate of how the company is moving forward after the housing market implosion: It is facing a fair amount of resistance, but in the end it has evened out and is moving onward and upward.
Speaking of onward and upward, I can also see more of a conscience this quarter out of Goldman Sachs, which to me shows a general move by the company away from the poor business practices that got it into a mess in the first place. While moral grounding doesn't necessarily guarantee a company like Goldman Sachs will make more money, from everything I've learned, it's this kind of moral fiber that will prevent the company from losing more from frivolous mistakes.
As of April 1st, Goldman Sachs has sold its 16% stake in Village Voice Media, the media company which produces the weekly paper The Village Voice. The significance here is that the media group owns a website called "Backpages.com" which is now linked with escort services, prostitution, and more dismal forms of human trafficking. While Goldman Sachs lost on the investment at the point of sale, I think it is evident that there could have been much more damage done to Goldman Sachs' value from continued business relations with a group associated with human trafficking violations.
Goldman Sachs has even been making steps to secure more global gains by increasing its profile in the ever-growing India. Even though the domestic market is currently looking bullish, I think the step on to foreign soil is a really good move. Quite frankly, the leaps and bounds India's economy has been making proves it to be a ripe field for sure-fire profit for Goldman Sachs because the company has the experience and staying power to become as significant as a multinational group, considering its 142 year presence on the New York Stock Exchange. As the article notes, Goldman Sachs holding its first Indian board meeting is following a trend started by such companies as PepsiCo, Inc. (PEP), but it is increasing its presence early enough to make a significant and marked impact.
Furthermore, recent errors made by JPMorgan Chase (JPM) have resulted in a fall in value for the company, which has been going strong since the new year, and I think this could be one of multiple compound factors that give other competitors, like Goldman Sachs, a chance to soar. The errors involved an undisclosed numbers of accounts held by Chase Bank clients "double-drawing," effectively resulting in JPMorgan Chase needing to issue reimbursements and apologies.
Even though the errors were supposedly limited to a small area in the New York Tri-State area, the carelessness of the mistake will probably cause investors to invest their hard earned dollars more hesitantly in the financial giant. Another factor which could benefit competitors of JPMorgan Chase is the recent resignation of yet another high ranking banker who is now linked to trading insider information.
All things considered, Goldman Sachs has the look of a company that is going to increase in value. The recent developments go hand in hand with its declaration that preferreds like its Fixed Income Trust, Series 2011-1, 6.75% Certificates Goldman Sachs Subor Notes (TFN) are benefiting. As the preferred has been hovering around its issue amount, we are facing one of the best opportunities possible to get in on the security of a preferred stock in one of the longest running financial groups on Wall Street.
The fact of the matter is that Goldman Sachs wants to ensure investors' faith in its worth, encourage them to invest more, and reward those of us who choose to act on that faith accordingly. Beyond its own interest in itself, the recent citations (see poor loan/foreclosure practices above) will ensure that the progress of Goldman Sachs will be watched by the Fed like a hawk, adding yet another security blanket to any potential investments.
Quite frankly, the biggest concern for me would be about whether such a company has staying power, but due to the sheer resilience of surviving both the Great Depression and the housing market crash, Goldman Sachs has proven itself to be, at minimum, an even bet.
I think it is safe to say that the company is "out of the fire" and ready to be rediscovered by investors looking to turn a profit.