Goldman Sachs Remains Pick of the Litter: Barron's (GS,C,JPM,MS)
12/29/2009-Barron's writer Teresa Rivas wrote a piece entitled "Goldman Is Still the Golden Boy," arguing that investors shouldn't "discount all brokers in 2010" most notably, Goldman Sachs (NYSE:GS).
Rivas said that while BofA Merrill Lynch analyst Guy Moszkowski slashed his Q4 EPS estimates for US-based brokerages, citing a slowdown in trading which began in November, the companies' shares barely moved on the news.
Moszkowski cut his EPS estimates for Goldman Sachs (NYSE:GS) to $5.74 from $6.57 (vs. consensus estimates of $5.56), Morgan Stanley (NYSE:MS) to $0.40 from $0.47 (vs. consensus estimates of $0.54), and JPMorgan Chase (NYSE:JPM) to $0.68 from $0.71 (vs. consensus estimates of $0.63).
Meanwhile, the BofA Merrill analyst left his Citigroup (NYSE:C) Q4 EPS estimate unchanged at a $0.36 per share loss (vs. consensus estimates for a loss of $0.32). Moszkowski noted however, that the "probability of a worst-case outcome (for Citi) is receding at this point."
That being said, the analyst wasn't completely bearish on financials, as all of the aforementioned names are on his "Buy List," with the exception of Morgan Stanley, which he has a neutral rating on. Furthermore, he said that a rebound in activity usually occurs following the fourth quarter "following the November-December trading hiatus."
In addition to having the largest amount of cash on its balance sheet and the least amount of debt, Goldman is the cheapest among these names, as it trades at 8.8 times 2010 earnings and has fallen 10% over the last three months.
Rivas concluded, "much of that thesis remains intact -- Goldman has continued to deliver double-digit surprises on the upside even without stellar performance, and remains an industry bright spot."
by Chip Brian