Goldman Stock 'Convictions' That Lose Money

BOSTON (TheStreet) -- Goldman Sachs'(GS) slide in second-quarter earnings and revenue proved that even giant vampire squid aren't infallible. Evidently, the squid's "conviction buy" ratings aren't either.

The most embarrassing part of Goldman's earnings report released Tuesday was the performance in equities trading. The business had revenue of $235 million, as TheStreet's Dan Freed pointed out. That compares with $1.47 billion in the first quarter and $2.16 billion a year earlier. Even Morgan Stanley(MS), a perennial runner-up to Goldman, beat analysts' second-quarter expectations and posted little-changed equity-trading revenue compared with the first quarter.

Goldman stumbled not only in its key trading businesses but also in stock-picking. Periodically, the New York-based bank adds "buy"- and "sell"-rated shares to what it calls its "conviction" list, which "represent investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return," Goldman says in a disclaimer. For investors, owning a stock on Goldman's "conviction buy" list is as close to a sure thing as it gets.

Still, some recommendations haven't panned out as stocks have been dragged down by concerns of slowing economic growth at home and abroad. Goldman's equity-trading revenue tumbled because stock-market volatility rose when the firm was expecting a decline.

The following five stocks were added to Goldman's "conviction buy" list during the second quarter but have handed investors losses so far. Many of these stock price targets have a 12-month horizon, so they may still turn out to be winners for the bank.

5. Boeing(BA)

Goldman's Call: The firm added the airplane maker to its "conviction buy" list on May 10 with a 12-month stock-price target of $84. "We see multiple near-term positive catalysts for BA from now to year-end, including the Farnborough Air Show, new order announcements, further production rate increases announcements, earnings, and 787 deliveries," analyst Noah Poponak wrote in a research note on June 25.

Stock Performance Since Recommendation: -5.1% (July 21 close)

S&P 500 Performance Since Recommendation: -3.7%

Who Got It Right: Three research firms have had a "sell" rating on Boeing since April, including Societe Generale and Jyske Bank. They have a price target on Boeing shares of $65 and $64, respectively, which is about where the stock currently trades.