BALTIMORE (Stockpickr) -- OK, we get it. The SEC's Goldman Sachs (GS) suit is a major financial news event from a political perspective. But should you expect the fallout to actually impact your portfolio?
That's a question that most market pundits seem to be markedly less sure about. Here's a glimpse at the companies that could suffer from Goldman's legal troubles -- and those that could profit.
In short, the SEC filed fraud charges against Goldman last week, alleging that the firm tricked investors into buying collateralized debt obligations, or CDOs, that Goldman and its more-sophisticated clients had an economic interest in seeing go bust. The market reacted to the shock of seeing Wall Street's most-well-connected firm get charged by tumbling, and even worse off was Goldman Sachs' stock itself. The company fell nearly 13% on Friday, in the biggest single-day slide since January 2009.
But Goldman could be headed higher in spite of the added drama.>> Who Owns Goldman?: Ken Heebner While the company is facing a PR nightmare right now, its operations aren't largely affected by public perception. Instead, Goldman caters to more-sophisticated institutional investors who are bound to be less concerned with Goldman's blemishes as long as its financial health remains strong. As far as Goldman's business is concerned, SEC fines and legal liability are the biggest threats presented by the suit. But any SEC-imposed fines are likely going to be immaterial to Goldman's fundamental prospects, and even legal liability is unlikely at this point. After all, Goldman had been well aware of the SEC's concerns over its CDOs. Had liabilities been a real concern, the company would have probably settled quickly and quietly. I'd expect that the firm's counsel is fairly confident in their legal position. Given the fact that Goldman lost around $12 billion in market capitalization last week, this stock presents a strong value story right now -- particularly after doubling quarterly profits in earnings numbers released yesterday. At current levels, Goldman could be the stock with the most upside potential after last week's news. That's not to say that other firms won't be affected by what's going on with Goldman right now.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV