Goldman's 2014 crystal ball


Multiple expansion was behind stock gains this year, but next year it'll have to be earnings and money flow rather than further valuation re-rating, says Goldman's David Kostin, reiterating his cautious 1,900 end-of-2014 target for the S&P 500 (SPY).

Margins are key, and Goldman's forecast is the "greatest investable gap relative to consensus expectations.” The bank expects 8.9% in 2014 and 9% in 2015 vs. the Street at 9.5% and 10.1%, respectively. Every 50 basis point swing in margins translates into a swing of about $5 per share in EPS.

Four recommended strategies: Pick growth (IWF) over value (IWD), firms investing in capex, companies with high buyback yields (seems contradictory with previous), and stocks with high operating leverage.

As for sectors, Goldman is favoring IT (VGT), consumer discretionary (XLY), and industrials (XLI) vs. underweighting consumer staples (XLP), utilities (XLU, IDU), and telecom (IST).

S&P 500 ETFs: SPY, SH, SSO, SDS, IVV, SPXU, UPRO, VOO, RSP, RWL, EPS, BXUB, TRND, SFLA, BXUC, BXDB

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Comments (1)
  • Budavar
    , contributor
    Comments (1409) | Send Message
     
    GS in the past has been Ianus faced on gold.
    Can it be trusted now?
    21 Nov 2013, 12:12 PM Reply Like
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