Stockpickr: Trade Like Goldman Sachs
James Altucher
03/27/07 - 07:37 AM EDT
Let's face it:
Goldman Sachs(GS Quote - Cramer on GS - Stock Picks) is the best bank out there. It sees all the deal flow, and both major political parties are full of former Goldman executives.
Goldman has consistently generated great profits from its proprietary trading and investing. If I could be a fly on the wall, I would be one at Goldman, the center of the trading universe. Of course I can't be a fly on the wall, but Stockpickr provides three Goldman Sachs portfolios that you can emulate:
The Goldman Sachs Large Cap Value Fund was up 18.4% in 2006; up 14.6% on average over the past three years; and up 11.7% over the past five years, handily beating the
S&P 500 in each of those periods. It's among the funds with the longest streaks beating the S&P 500, having done so since 1999.
It has stayed focused on owning large-cap value plays. For instance, it owns
Exxon Mobil(XOM Quote - Cramer on XOM - Stock Picks). True, it's going to be hard for Exxon, with a $423 billion market cap, to double in size anytime soon. But it's hard to find a safer bet. Exxon trades at just five times cash flows, has more than $20 billion net cash in the bank and, if any of the peak oil theorists such as T. Boone Pickens are right about the price of oil, it will continue to have steady profits.
Exxon can easily hit $90 to $100 during the next price surge in oil. The stock is a holding of many hedge funds, including
Renaissance Technologies and
Citadel Investments.
The Goldman Large Cap Value Fund also owns
Waste Management Industries(WMI Quote - Cramer on WMI - Stock Picks). Beyond being a solid demographic play (I know I create more trash every year; at the very least, there's more trash on the floor of my office right now than there was a year ago), Waste Management trades at just seven times cash flows, making it a possible takeover target.
Additionally, analysts expect the company to earn $2.17 a share in 2008, up from $1.98 in 2007 and $1.81 in 2006 -- solid double-digit growth each year. Bruce Kovner, one of the "Market Wizards" featured in Jack Schwager's book of that name, also owns Waste Management through his
Caxton Associates.
Abby Joseph Cohen was recently profiled for the
Barron's Roundtable, where she spoke about her views on the market and some of her top picks. She is more market timer than stock picker, but she chooses stocks from Goldman's buy list that correspond with her macro views on the market. She's currently bullish on the market and the U.S. consumer.
For instance, she's bullish on
Royal Caribbean(RCL Quote - Cramer on RCL - Stock Picks).
Regarding Royal Caribbean, she states: "This is not a budget cruise line. In this higher-income demographic, compensation and household incomes are rising. ... In '07 there could be a substantial increase in the company's revenue, on the order of 13% or 14%. Earnings, which were flattish in '06, could go up about 8%. At 13 times earnings, the stock sells at a discount to its competitors."
She's also bullish on
MedImmune(MEDI Quote - Cramer on MEDI - Stock Picks), a specialty pharmaceuticals company.
About this company she says: "It has been a significant player in the HPV [human papilloma virus] vaccine, which represents one of the truly dramatic changes in public health care. The vaccine has been seen to affect the virus, and therefore eliminate a form of cancer, which is quite extraordinary. The P/E is high, but earnings are about to grow dramatically. Long-term earnings growth is about 18%."
Medimmune is a stock that also appears on
Top Stem Cell Stocks, a list created by Stockpickr user and noted blogger Stockerblog.
Finally, in Goldman Sachs Picks & Pans,
eBay(EBAY Quote - Cramer on EBAY - Stock Picks) is listed among the favorites.
eBay has never really recovered since its acquisition of digital phone company Skype in late 2005:
eBay (EBAY)
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The integration never went well and the stock has floundered. But at this point it's floundered too much; people are throwing out the baby with the bathwater. Noted value investor
Prince Al-Waleed, who made his fortune on a similarly struggling AOL and
Citigroup(C Quote - Cramer on C - Stock Picks) in the '90s, has been buying up shares of eBay as well.
Analysts continue to expect double-digit growth from eBay, with earnings per share estimated at $1.51 for 2008 and $1.28 for 2007, which is up from $1.05 in 2006 -- about 20% year-over-year growth. Meanwhile, with a solid balance sheet of $3.2 billion in cash and no debt, eBay is in no mortal danger.
For the rest of Goldman's tech favorites, and also some of its short picks among tech stocks, check out the
Goldman Picks & Pans page on Stockpickr.
Goldman Sachs has a lot of different pockets, and I'm sure not all of them speak to each other. But the company has been successful in every business it has entered; it has the smartest analysts researching these ideas; and it is also privy to enormous information flow no matter how many walls go up between trading, banking and research.
At the very least, the three pockets presented here are good starting points for research.
