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Why I Purchased Goldman Sachs (GS) Friday

by Steve Patterson on Thursday, July 23, 2009 8:46 PM

Why I Purchased Goldman Sachs (GS) Friday

Last Friday I purchased Goldman Sachs Group (GS) as the markets quickly recovered from month lows and broke to the upside as earnings season got underway. This was after GS reported great earnings that beat expectations by 40% with analysts increasing their expectations for future quarters and the year.

Markets Jump

What a difference two weeks make? Prior to the start of earnings season the indexes were slowly falling to new month lows and signaling a sell. But a number of companies have beaten their expectations including Goldman Sachs (GS), Johnson & Johnson (JNJ), JPMorgan Chase (JPM), and International Business Machines (IBM) giving the bulls reason to buy.

Earnings Expectations

The case for Goldman Sachs is fairly strong. For the quarter ending September 2009 analyst have increased their expectations for the company’s earnings from $2.08 a share to $3.30 a share. This is an increase of 59%. The stock itself has moved from $125 to $165 a share which does represent an increase of 32% but not equal to the earnings increase.

The Trade

The trailing price to earnings ratio is currently 37 with the forward price to earnings at 10. Earnings increases could reach 82% for the current quarter and 183% for the next quarter. These increases would make the P/E conservative. Analysts have an average price target of 173.5 for the year. With the markets moving higher and Goldman Sachs being one of the strongest in it’s industry, holding GS until the end of the earnings season is a trade that I wanted to make.

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Steve Patterson

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18 comment(s) so far...

Anonymous 7/24/2009

I have fixed the commenting which was not working for a couple of days. Sorry for the inconvenience.

 
Anonymous 7/25/2009

Good buy indeed!<br>But I think it was a little of a gamble, really.

 
Anonymous 7/25/2009

The stock has moved 5% higher in the past week. I believe this trade is solid for a 10% gain in a month in my opinion.

 
Anonymous 7/27/2009

20/20 being hind site. looks rough for any who bought anything

 
Anonymous 7/28/2009

Goldman sees potential short covering if GE delivers a high quality 2Q beat, but maintains their Neutral rating and $16 price target on uncertainty due to U.S. financial regulatory reform which could require GE to spin or divest parts of GE Capital.

 
Anonymous 7/29/2009

hind site is another thing. sorry for all that bought them

 
Anonymous 7/29/2009

yes i totally agree

 
Anonymous 7/30/2009

this is bad.. soory for all those who bought into it.

 
Anonymous 7/30/2009

There has been a pause in the markets but there is still a good amount of earnings season remaining for an additional rally.

 
Anonymous 7/31/2009

totally agree on this!.. good post

 
Anonymous 8/1/2009

I second Obama's comments recently when he said its the start of the end of recession.. i think market will grow from now onwards.. we have already started seeing improvements in the global economy.

 
Anonymous 8/4/2009

Thanks for the info- it turns out Microsoft's bing really is making an impact, it seems to me your blog is getting a lot of search engine traffic from bing- have you found this to be the case? <br>

 
Anonymous 8/20/2009

Is it true that investment bankers from Goldman Sachs make over $20 million dollars in bonuses alone? How?

 
Anonymous 9/8/2009

That's great, I never thought about Why I Purchased Goldman Sachs (GS) Friday like that before.<br>

 
Anonymous 10/14/2009

Goldman has again become the poster boy of investment banking.<br><br>Thanks,<br>Steve

 
Anonymous 8/31/2010

I think that stock is one solid one, just need to ride the highs and lows.<br />Thanks for this article.

 
Anonymous 11/10/2010

Great choice! You sure know what to do to get the biggest profit.

 
Anonymous 6/15/2011

Its kind of a risk but great purchase indeed.

   
  
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