Goldman Sachs says investors should do well with stocks that have the highest sales-to-assets and sales-to-employee multiples, such as Apple (AAPL) - Get Apple Inc. (AAPL) Report, Humana (HUM) - Get Humana Inc. (HUM) Report and Clorox (CLX) - Get Clorox Company Report.
“Rapidly shifting outlooks for inflation and interest rates mean most equity investors should focus on identifying trends that will remain after ‘transitory’ dynamics have passed,” Goldman analysts, led by Chief U.S. Equity Strategist David Kostin, wrote in a commentary.
“Stocks with the highest sales/assets and sales/employee ratios have outperformed during the past decade and in recent weeks but still trade at discounted valuations.”
In addition to the trio of stocks mentioned above, Goldman cites Moderna (MRNA) - Get Moderna, Inc. Report, Valero Energy (VLO) - Get Valero Energy Corporation Report, Facebook (FB) - Get Facebook, Inc. Class A Report, Dow (DOW) - Get Dow, Inc. Report, Match (MTCH) - Get Match Group, Inc. Report, Lockheed Martin (LMT) - Get Lockheed Martin Corporation (LMT) Report, Nucor (NUE) - Get Nucor Corporation Report and others.
“Although the likely impact of supply chain issues on 2022 earnings remains unclear, eventual supply chain normalization seems inevitable,” Kostin said.
“As a result, incremental news flow around the timing of that normalization will likely continue to generate volatile rotations within the equity market but should have little impact on investors with medium- to long-term investment horizons.”
So what does matter long-term?
“Labor-market tightness is one theme that has recently driven equity-market performance and will likely remain a challenge for many companies for years,” Kostin said.
“Our economists expect Covid-related pressure on labor-market supply will ease in coming months but forecast a U.S. unemployment rate of 3.5% by the end of 2022, meaning companies will continue to face many of the labor market challenges they face today. …
“Stocks from each S&P 500 sector with the highest ratios of sales/assets and sales/employees have outperformed the equal-weighted S&P 500 by an annual average of 15 percentage points during the past decade.”