Why I'm Buying Goldman Sachs

In light of a previous post in regards to sector rotation, I am beginning a stake in Goldman Sachs (GS). I've been waiting for a breakout over $185, which was the March high. We have some serious resistance at the 200 day moving average, $197, but if that breaks - the sky is the relative limit.

I am doing this to create a more balanced approach in the fund, sort of a mini barbell effect. I now have 2 homebuilders and 2 investment banks (Morgan Stanley being the other) - while in total they make up 10% or so of the fund, I need to have "something" working when the market turns to its early cycle play. The last few times money "flowed" from commodities to other areas (however short of time frame) the fund really suffered; so this should help to mitigate some of this suffering if we are about to embark on another rotation.

Another option would be Ultra Financial (UYG) which is double the return of the financial index. I prefer to go with the company with their hands in every piece of our government and economic system.

I'm starting Goldman Sachs with a 2.4% stake buying in the $186s...

I've added even more Morgan Stanley (MS) as well, to my earlier purchases (this one is up nearly 6% ). When/if these 2 companies break above their next level of resistance (200 day moving averages) I'll pile more into these positions... with unfettered access to the Fed's balance sheet, with much lighter regulation than traditional banks - these guys should now be able to run wild with your taxpayer dollars.)

Merrill Lynch (MER), and Lehman Brothers (LEH) probably have more upside, but I consider them more speculative at this time.

Disclosure: Long Goldman Sachs, Morgan Stanley in fund; long Morgan Stanley in personal account

Comments

[fxtrader07]

those homebuilders will cost you dear, rest assured. this is not a cyclical downturn in housing - it's a huge bubble unwinding. before year-end your homebuilders will make new lows and some public HBs will have gone bk.

[sliman]

I own UYG but I could see buying GS. Good luck

[Cousin A.]

Your reasoning as to "beginning a stake in Goldman Sachs (GS)" is certainly on target, to-wit: "I prefer to go with the company with their hands in every piece of our government and economic system" and ... "with unfettered access to the Fed's balance sheet, with much lighter regulation than tradiditonal banks - these guys should now be able to run wild with your taxpayer dollars." We may or may not like it, but that is the way it is.

[TraderMark]

Better to speak the truth than hide behind it :)

[europeaninvest]

don't forget that they own a large position in ICBC. This Chinese bank reported no subprime exposure and extraordinary earnings. Should provide some support for GS.

[duhduhduh51]

I don't know. I think the market is so volatile these days that I'm not sure if I would consider a long term investment in the finance sector. It would be an interesting place to look for some quick opportunities with options! Just a thought...

[TraderMark]

duhduh
if its chart breaks down, I'll be cutting back

But didnt you hear? the bottom is in? everything will be fine in 6 months? housing will be booming by September? etc etc etc ...

If they keep repeating this for another 18 months they will eventually be correct. Until then, Rome parties.

[Kunst]

Homebuilders (XBH) are up 20% YTD. Did something get better during that time?

[Ames Tiedeman]

XBH will not stay up 20%.