Investment banking giant Goldman Sachs (GS) doesn't need much of an introduction. Goldman is one of the last remaining vestiges of the legacy Wall Street investment banks, and it bears all of the benefits baggage that comes along with that title. One of the benefits was upside; Goldman's shares gained 32.4% in the last year, even besting the S&P's performance by another 7.6%.
Goldman's businesses span the financial gamut, from investment banking and institutional prime brokerage to wealth management and lending. Because Goldman's business is tied to the health of the financial markets, it acts like a leveraged bet on equities. That means that the current stock market rally gives GS shareholders claim to even bigger upside. Even though the risk (and thus potential profits) that Goldman is allowed to take has been reduced by regulators, a rising tide should continue to lift the ship.
Reputation matters on Wall Street. That means that Goldman Sachs' status as one of the most well-connected financial firms still holds a lot of cachet, especially with high-net worth retail clients. As GS gets comfortable with lower margins and more deal volume, the firm should settle into its new structure -- and get some premium put back into its bargain valuation.
With rising analyst sentiment this week, we're betting on shares.