NEW YORK (TheStreet) -- When Goldman Sachs (GS - Get Report) speaks, the investment world listens.

This week analysts at the venerable investment bank tweaked their Financials Conviction List -- a lists of stocks that are must-buys in Goldman's view.

While the list is ongoing, the analysts made two additions this week -- adding Oaktree Capital (OAK - Get Report) and XL Group (XL) -- and removed CBRE Group (CBG) .

"Financials have recently benefitted from greater domestic exposure amidst improving U.S. housing/jobs data and concerns of a slowdown in China while still screening as one of the cheapest sectors in the market," the Aug. 12 note said. "That said, we are taking a slightly more defensive approach to our top ideas here, looking at growth and upside opportunities within the context of relative valuation and capital deployment for potential downside support."

Goldman's conviction list is comprised of companies that are: levered to continued improvement in U.S. macro (housing, employment); later-cycle growth stories; and underappreciated micro stories with re-rating opportunities, according to the note.

TheStreet added ratings from TheStreet Ratings for additional perspective. Here's the list.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on Aug. 12, 2015 closing prices.

APAM Chart APAM data by YCharts

1. Artisan Partners Asset Management Inc. (APAM - Get Report)
Sub-Industry: Asset Management & Custody Banks
Market Cap: $3.4 billion
Year-to-date return: -7.6%

Artisan Partners Asset Management Inc is publicly owned investment manager. It provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. funds and collective trusts.

Goldman Sachs 12-month price target: $52
Goldman Sachs said:
As the stock still trades at a near-trough multiple of 13x 2016 P/E, we see significant room for shares to re-rate higher particularly as we are now seeing signs of a turnaround in flows at APAM. Its 6% dividend yields provides a source of support.

TheStreet Ratings: Hold, C
TheStreet said:
"We rate ARTISAN PARTNERS ASSET MGMT (APAM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ARTISAN PARTNERS ASSET MGMT has improved earnings per share by 19.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARTISAN PARTNERS ASSET MGMT continued to lose money by earning -$0.72 versus -$2.02 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus -$0.72).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 23.6% when compared to the same quarter one year prior, going from $19.26 million to $23.80 million.
  • 37.02% is the gross profit margin for ARTISAN PARTNERS ASSET MGMT which we consider to be strong. Regardless of APAM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.25% trails the industry average.
  • APAM has underperformed the S&P 500 Index, declining 12.25% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

 

 

BAC Chart BAC data by YCharts

2. Bank of America Corp. (BAC - Get Report)
Sub-Industry: Diversified Banks
Market Cap: $183 billion
Year-to-date return: -2%

Bank of America Corporation is a bank holding company. The company, through its subsidiaries, operates through Consumer and Business Banking; Consumer Real Estate Services; Global Wealth and Investment Management; Global Banking; Global Markets; and Other segments.

Goldman Sachs 12-month price target: $21
Goldman Sachs said: While valuation has re-rated over the last several months, we still see upside to shares as we think the market underappreciates BAC's ability to generate operating leverage.

TheStreet Ratings: Buy, B+
TheStreet said:
"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, solid stock price performance, impressive record of earnings per share growth and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BAC's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 132.2% when compared to the same quarter one year prior, rising from $2,291.00 million to $5,320.00 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • BANK OF AMERICA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BANK OF AMERICA CORP reported lower earnings of $0.35 versus $0.91 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $0.35).
  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 86.17%. Regardless of BAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BAC's net profit margin of 21.48% compares favorably to the industry average.

 

ETFC Chart ETFC data by YCharts

3. E*Trade Financial Corp. (ETFC - Get Report)
Sub-Industry: Investment Banking & Brokerage
Market Cap: $8.2 billion
Year-to-date return: 16.5%

E*TRADE Financial Corporation, a financial services company, provides brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand name. It operates through two segments, Trading and Investing, and Balance Sheet Management.

Goldman Sachs 12-month price target: $35
Goldman Sachs said: ETFC is one of the best restructuring stories in Financials and we see the ability to almost double current earnings power by resolving legacy issues (including the sale of its loan portfolio) by the end of 2016.

TheStreet Ratings: Buy, B
TheStreet said:
"We rate E TRADE FINANCIAL CORP (ETFC) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations, expanding profit margins and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • E TRADE FINANCIAL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, E TRADE FINANCIAL CORP increased its bottom line by earning $1.00 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $1.00).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 323.2% when compared to the same quarter one year prior, rising from $69.00 million to $292.00 million.
  • Net operating cash flow has significantly increased by 107.44% to $919.00 million when compared to the same quarter last year. In addition, E TRADE FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -505.86%.
  • 41.39% is the gross profit margin for E TRADE FINANCIAL CORP which we consider to be strong. Regardless of ETFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ETFC's net profit margin of 59.83% significantly outperformed against the industry.
  • Powered by its strong earnings growth of 312.50% and other important driving factors, this stock has surged by 41.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

 

 

LAZ Chart LAZ data by YCharts

4. Lazard Ltd. (LAZ - Get Report)
Sub-Industry: Investment Banking & Brokerage
Market Cap: $7 billion
Year-to-date return: 7%

Lazard Ltd, together with its subsidiaries, operates as a financial advisory and asset management firm.

Goldman Sachs 12-month price target: $69
Goldman Sachs said: LAZ is the primary beneficiary of a recovery in European M&A activity which is likely to lead to continued growth in revenue per employee and margin expansion potential that is well ahead of consensus expectations. Coupled with a strong international/institutional focused asset management business and a valuation that is at a discount to its SOTP, we see meaningful share upside potential.

TheStreet Ratings: Buy, A-
TheStreet said:
"We rate LAZARD LTD (LAZ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • LAZARD LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LAZARD LTD increased its bottom line by earning $3.21 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($3.95 versus $3.21).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 339.1% when compared to the same quarter one year prior, rising from $85.19 million to $374.11 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 6.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, LAZARD LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.

 

 

MTG Chart MTG data by YCharts

5. MGIC Investment Corp. (MTG - Get Report)
Sub-Industry: Thrifts & Mortgage Finance
Market Cap: $3.7 billion
Year-to-date return: 16%

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States.

Goldman Sachs 12-month price target: $13
Goldman Sachs said:
MTG has one of the longest tailwinds from declining credit costs within Financials (burn out of legacy risk and lower than expected loss ratios on new business). In addition, we see the potential deployment of excess capital as a driver of earnings upside going forward.

TheStreet Ratings: Hold, C
TheStreet said:
"We rate MGIC INVESTMENT CORP/WI (MTG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, MGIC INVESTMENT CORP/WI's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MGIC INVESTMENT CORP/WI reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MGIC INVESTMENT CORP/WI turned its bottom line around by earning $0.64 versus -$0.23 in the prior year. This year, the market expects an improvement in earnings ($0.99 versus $0.64).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 149.7% when compared to the same quarter one year prior, rising from $45.52 million to $113.65 million.

 

 

OAK Chart OAK data by YCharts

6. Oaktree Capital Group Inc. (OAK - Get Report)
Sub-Industry: Asset Management & Custody Banks
Market Cap: $8.5 billion
Year-to-date return: 6%

Oaktree Capital Group, LLC operates as a global investment management firm that focuses on alternative markets.

Goldman Sachs 12-month price target: $61
Goldman Sachs said:
We see cash earnings (DE) at OAK accelerating to 21% CAGR through 2017 amid big fund raises, margin expansion, and a step-up in incentive fees, with OAK's counter-cyclicality providing stability if markets get choppy.

TheStreet Ratings: Buy, B-
TheStreet said:
"We rate OAKTREE CAPITAL GROUP LLC (OAK) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 20.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • OAKTREE CAPITAL GROUP LLC's earnings per share declined by 43.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, OAKTREE CAPITAL GROUP LLC reported lower earnings of $3.01 versus $6.43 in the prior year. For the next year, the market is expecting a contraction of 16.9% in earnings ($2.50 versus $3.01).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has significantly decreased by 36.5% when compared to the same quarter one year ago, falling from $31.19 million to $19.81 million.

 

 

STI Chart STI data by YCharts

7. SunTrust Banks Inc. (STI - Get Report)
Sub-Industry: Regional Banks
Market Cap: $22 billion
Year-to-date return: 2.5%

SunTrust Banks, Inc. operates as the holding company for SunTrust Bank that provides various financial services in the United States. The company operates in three segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking.

Goldman Sachs 12-month price target: $50
Goldman Sachs said:
STI is well-positioned in the current environment given its Southeast footprint as well as opportunities to grow within its Corporate & Investment Banking. Further we think the market is still somewhat skeptical on their ability to deliver on their efficiency target (<63% for 2015) which we think management is committed to.

TheStreet Ratings: Buy, A-
TheStreet said:
"We rate SUNTRUST BANKS INC (STI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • SUNTRUST BANKS INC has improved earnings per share by 23.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SUNTRUST BANKS INC increased its bottom line by earning $3.23 versus $2.41 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $3.23).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 21.1% when compared to the same quarter one year prior, going from $399.00 million to $483.00 million.
  • The gross profit margin for SUNTRUST BANKS INC is currently very high, coming in at 92.77%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.23% is above that of the industry average.
  • Net operating cash flow has significantly increased by 205.66% to $972.00 million when compared to the same quarter last year. Despite an increase in cash flow of 205.66%, SUNTRUST BANKS INC is still growing at a significantly lower rate than the industry average of 795.39%.

 

 

VOYA Chart VOYA data by YCharts

8. Voya Financial Inc. (VOYA - Get Report)
Sub-Industry: Other Diversified Financial Services
Market Cap: $10 billion
Year-to-date return: 4.3%

Voya Financial, Inc. operates as a retirement, investment, and insurance company in the United States. The company has five segments: Retirement, Annuities, Investment Management, Individual Life, and Employee Benefits.

Goldman Sachs 12-month price target: $53
Goldman Sachs said:
We see further upside at VOYA from a transition to growth in secularly advantaged businesses, while momentum in the turnaround remains. Further, capital deployment is likely to increase while VOYA could also see its multiple expand as ROEs continue to improve.

TheStreet Ratings: Buy, B-
TheStreet said:
"We rate VOYA FINANCIAL INC (VOYA) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, solid stock price performance and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • VOYA's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 11.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Diversified Financial Services industry and the overall market, VOYA FINANCIAL INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Financial Services industry average. The net income increased by 15.8% when compared to the same quarter one year prior, going from $246.30 million to $285.20 million.

 

 

XL Chart XL data by YCharts

9. XL Group Plc (XL)
Sub-Industry: Property & Casualty Insurance
Market Cap: $12 billion
Year-to-date return: 15.3%

XL GROUP Public Limited Company, an insurance and reinsurance company, provides property, casualty, and specialty products to industrial, commercial, and professional firms; and insurance companies and other enterprises worldwide. The company operates in two segments: Insurance and Reinsurance.

Goldman Sachs 12-month price target: $44
Goldman Sachs said:
XL is well-positioned given buybacks are not only accelerating (we have them buying back just under 20% of market cap through 2017) but are more likely to be accretive for them with the stock trading at just under 1x BVPS.

TheStreet Ratings: Buy, B
TheStreet said:
"We rate XL GROUP PLC (XL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, compelling growth in net income and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 14.0%. Since the same quarter one year prior, revenues rose by 47.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although XL's debt-to-equity ratio of 0.22 is very low, it is currently higher than that of the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 427.7% when compared to the same quarter one year prior, rising from -$279.26 million to $915.04 million.
  • XL GROUP PLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, XL GROUP PLC reported lower earnings of $0.68 versus $3.62 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $0.68).