Goldman Sachs: Buy and Avoid

This was a tangential subject of discussion during the March Round Table. We’ve added Goldman Sachs price targets and will be monitoring them versus ACE and S&P.

Nutshell: Might this be a way to gauge sentiment? In this case, these differentials could deliver influence or impact, providing a potentially meaningful sentiment indicator.

Gs buy avoid list 20150331

As a quick reminder to be careful out there, this is what this morning held for Garmin (GRMN).

That’s a reduction from $63 to $54.


Grmn gs opinion 20150402

More Fun With Goldman Sachs

When they’re not doing “God’s work” or referring to retail investors as Muppets, Goldman Sachs (GS) makes some calls — long and short — that can be influential in the market. In some Wall Street circles, the legions of Goldman Sachs are playfully known as Masters of the Universe.

In addition to the two lists shared above, here’s a list of nineteen stocks that Goldman Sachs believes are headed for price swoons — a list of stocks to sell short.

Goldman Sachs offers three criteria on how to pick stocks to short:

  • Look for individual stocks with high valuations that have a tendency to underperform;
  • take hints from mutual funds as they do a good job of selecting shorts;
  • and look for stocks that are likely to move on company-specific factors and are less prone to moving with general market and sector trends.

Among the overvalued stocks Goldman thinks could drop are Celgene (CELG), OReilly Automotive (ORLY) and Red Hat (RHT). Stocks underweight by mutual funds that could fall are HST, CTL and EQR; and likely to deviate from the broad market and their sectors are KLAC, JEC and COH.

Rounding out Goldman’s 19 stock recommendations that could reward short sellers: ARG, DO, DISCA, FLS, KSS, MOS, NDAQ, NVDA, TDC, WU.

Tracking Dashboard:

Here are the tracking dashboards for the Goldman MOST UPSIDE and MOST DOWNSIDE stocks as of 3/31/2015:

A Time For Howling?


The explosive finish to 2013 continues as a work in progress and the surge makes Santa Claus rallies of the past look like flurries. With relatively few trading days left in 2013, the Value Line Arithmetic Average is now up 37.8%, the S&P has surged 31.8%, the Wilshire 5000 some 32.9% and the NASDAQ, a mere 38.1%. The flaky stocks are still in 4-wheel drive with after burners engaged. Yes, if you were anywhere near “fully invested,” a time to howl.

Speaking of howling, I did go to see The Wolf of Wall Street starring Leonardo DiCaprio this week. It’s vintage Martin Scorsese and tells the tale (through the eyes of the perpetrator) of boiler room brokerage firm Stratton Oakmont. If you’ve seen Boiler Room, it’s the same story but from the snarky angle of those responsible for the carnage. I’m not sure how the film managed to maintain an “R” rating while delivering a steady stream of naked bodies, drugs (quaaludes, specifically) more drugs and as someone suggested, the only purpose of the freely-flowing alcohol was to wash down the drugs. If the “F” word makes your skin crawl, imagine the expletive frequency of Boiler Room combined with GlenGarry Glen Ross. Now double it. You’ve been warned.

Taken in whole, it’s quite a statement on segments of humanity. Think Gordon Gecko. Greed. Now double it and triple the sleaze factor. I am pretty sure that I was contacted by Stratton Oakmont some twenty years ago. I’ve heard the “SCRIPT” personally. I was able to resist because of a grounding in fundamental analysis and an understanding of long-term expectations and stock market performance.

They call it dark humor. It’s been a long time since I’ve heard a motion picture audience laugh that much … even if much of the laughter was painfully muted and dipped in disgust. It’s telling that when reliving the auto crash sequence at the end of the movie, the hero/author/villain neglects to share that a head-on collision placed a young woman in intensive care where she nearly lost her life. And at least the Boiler Room version exposed the damage done to cold-call victims, innocent would-be investors turned penny stock speculators with pockets emptied before they figured out they were being financially molested. And maybe that’s the real car wreck.

Leonardo’s character, after committing hundreds of millions of dollars of fraud, was offered a securities industry ban and a fine of something like $100,000 at the time. Really? And he declined the offer, ultimately ending up with a 4-year prison sentence (served 22 months) and a larger fine — that is still largely uncollected. Really?

But what really tugs at my heart and soul are the massive legions, the raunchy queue of opportunists who lined up at Stratton Oakmont’s front door following an expose in Forbes that detailed the scumbaggery. I can only hope that we can blame embellishment and cinematography for the chest-beating zombie predators, a large room full of agents of doom, that is documented near the end of the movie as they cheer Leonardo’s decision to renege on his SEC deal and hastily get back on the phone to maul a few more people.

That’s a whole lotta wreckage.

Companies of Interest

The opportunities in Issue 6 are still very slim, with a Morningstar P/FV of 111% and S&P checking in at 109%. The post-Christmas sales are more likely to be found at Target versus Issue 6. Jacobs Engineering (JEC) checks in with one of the better return forecasts (10%) but the Value Line low total return forecast for JEC is 1-2%.

Materially Stronger: Kimball (KBALB), Packaging Corp (PKG), La-Z-Boy (LZB)

Materially Weaker: Central Garden & Pet (CENT), KB Home (KBH), Texas Industries (TXI)

Market Barometers

The Value Line low total return (VLLTR) forecast is 3.1%, down from 3.4%. We’re not sure whether these are uncharted waters, but at 3.1% — we’re certainly in waters that have not been navigated “recently.”