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Goldman Sachs(GS - Get Report) is another name that's enjoying excellent relative strength of late. In 2013 alone, shares have rallied more than 17%, buoyed by breakneck performance in the rest of the financial sector. Goldman is one of the last remaining legacy investment banks, a status that gives it attractive positioning right now as an equity rally starts making deals look attractive to capital-hungry firms again.
Goldman's legacy status counts for something in the financial sector. The firm has established a reputation as a well-connected firm that's staffed by smart professionals. Even if stories of GS employees mocking clients tarnished the firm's image somewhat, wealthy retail clients on the investment management side generally still feel that they'd rather be trading with Goldman than against it.
Investment banking deal sizes generally move in kind with the equity markets. That's because, statistically, firms can capture bigger price premiums when stocks are moving higher. So equities being up more than 5% in 2013 stands to benefit Goldman Sachs more than most.
The firm's decision to become a bank holding company was a matter of survival -- and it still is to some extent. Increased regulatory scrutiny helps to prevent Goldman from conspicuously over-leveraging itself in chase of returns. While that does mean that Goldman's profit potential is reduced, the bigger market share and more lucrative businesses that the firm has been enjoying post-recession should easily offset that.
I also featured Goldman recently in "
5 Stocks That Want to Pay You More This Quarter."