Go Long on Goldman Sachs Stock: Poll

It's time to go long on shares of Goldman Sachs, a new poll of TheStreet readers suggests.
By Eric Rosenbaum ,


NEW YORK (TheStreet) -- Shares of Goldman Sachs (GS) - Get Report hit a new, post-fraud charges low on Monday morning, a day before the Capitol Hill showdown between Goldman executives and the Senate.

On Tuesday, Goldman CEO Lloyd Blankfein and now-notorious subprime CDO magician Fabrice Tourre will face the Senate firing line. Will the Goldman executives be able to make their case before Washington and the public in a way that helps to boost Goldman's deflated share price? God's workers have probably never required more help from a higher power.

It's clear from the way Goldman Sachs' shares have traded ever since the Securities and Exchange Commission announced fraud charges on April 16 that investors are still concerned about the potential for long-term damage to Goldman's value.

On Friday, April 16, the day the SEC charges were announced, Goldman shares plummeted 15% in value, from over $184 in value to $160. Last Friday, Goldman Sachs shares closed at a new post-fraud charges low point: $157.40. The declining trend continued on Monday morning, with Goldman shares sinking another 3% to a share price below $153.

Over the weekend, the negative press for Goldman continued to unfold, as the Senate released emails showing that Goldman was profiting from the subprime mortgage meltdown -- a point that Goldman has vigorously gone out of its way to say has never been the case.

Last week, with the SEC fraud charges already taking their toll on Goldman shares, reports surfaced that a Goldman director had passed on insider trading information to disgraced hedge fund manager Raj Rajaratnam of the Galleon Group.

Investors have been placed in a tough position in relation to Goldman shares. Goldman shares have taken such a big hit that the question inevitably rises as to whether the fraud charges have created an opportunistic entry point for investors that don't already own Goldman.

More on Goldman Sachs

Goldman Emails Reveal Subprime Discussions

Goldman Sachs Won't Be Last Bank Fingered

Yet, as more bad news surfaces about Goldman Sachs -- seemingly on a daily basis -- current shareholders are faced with question of cutting their losses or riding out the bad news and hoping it ultimately passes.

Fraud is an unquantifiable risk. It's not just the SEC suit against Goldman. Several other

regulators around the globe are investigation Goldman Sachs now, and investors who lost a bundle in Goldman's subprime CDOs are also looking at options to sue Goldman.

The financial reform effort in Washington received a big boost from the SEC suit against Goldman, and it's unclear how big a hit on Goldman's profits the financial reform effort may exact.

There's so much noise related to Goldman Sachs, the simple investor quandary of "buy, sell or hold" has never been more complicated.

So we asked

TheStreet

last week,

Is it time to buy, hold or sell shares of Goldman Sachs?

The results of the survey show a much stronger stomach for Goldman Sachs shares than the current decline in Goldman's share value would suggest.

Approximately 63% of survey takers believe Goldman Sachs.

Goldman bulls with the strongest stomach out-voiced moderate Goldman bulls, too.

Thirty-eight percent of survey respondents classified Goldman as a "strong buy."

Approximately 25% of survey takers are a little queasy in making their Goldman recommendation, describing Goldman Sachs shares as an "antacid buy."

Only 20% of survey takers think Goldman Sachs shares should be sold, while 16% of investors are so paralyzed by all the Goldman news on a daily basis that they call Goldman Sachs shares a "hold" given the current crisis.

Hedge fund manager

John Paulson

made a bundle taking the short position against investors in Goldman Sachs' subprime investments, and that's what got Goldman Sachs into its current mess.

Still, the survey suggests that the long-short fiasco has come full circle: the short that caused the SEC fraud charges has provided investors with reason to go long on shares of Goldman Sachs.

-- Reported by Eric Rosenbaum in New York.

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