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Look for ROE growth when market treads water, Goldman says.

  • After the S&P 500's almost 19% gain YTD, the index is now trading near its fair value relative to interest rates, profitability, and price-to-book valuations, writes Goldman Sach chief U.S. strategist, David Kostin.
  • “We believe policy uncertainty and negative revisions to 2020 EPS forecasts will limit equity upside," he writes in a note.
  • Lower interest rates and lower tax rates may provide some support, he acknowledges.
  • In an environment of slower economic growth, Goldman is advising its clients to look for stocks with the best expected return-on-equity growth.
  • Goldman's basket of 50 S&P 500 stocks with the highest consensus estimates of ROE growth has outperformed the S&P 500 by 5 percentage points YTD.
  • Among the stocks in that basket are Under Armour (UA -1.5%), Apple (AAPL +2%), Cisco (CSCO +0.8%), Sempra Energy (SRE +0.6%), and Global Payments (GPN -0.4%).

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SymbolLast Price% Chg
UA--
Under Armour, Inc.
AAPL--
Apple Inc.
CSCO--
Cisco Systems, Inc.
SRE--
Sempra
GPN--
Global Payments Inc.