Goldman's picks for a low volatility world

|By:, SA News Editor

If volatility is to remain low for H2, go with stocks with the highest prospective Sharpe ratio, says Goldman.

The bank's High Sharpe Ratio basket holds 50 stocks in the S&P 500 with the highest scores using consensus expected returns and six-month option-implied volatility.

Since 1999, the strategy has outperformed the S&P 500 in 71% of semi-annual periods by an average of 362 basis points. After the latest rebalance, the median stock in the basket offers nearly three times the expected risk-adjusted return of the median S&P 600 company (0.8 vs. 0.3) and trades at a lower P/E ratio (13.1x vs. 18.4x).

New additions to the basket are AutoZone (NYSE:AZO), Discover (NYSE:DFS), Dollar Tree (NASDAQ:DLTR), and Intel (NASDAQ:INTC). None of the FAAMG names made the cut.

Source: Crystal Kim at Barron's

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