Goldman Sachs Group, Inc. (GS): Why Now Is the Time to Invest in the Smartest Guys on Wall Street

Page 1 of 2

Goldman Sachs (GS)Goldman Sachs Group, Inc. (NYSE:GS) has always been one of my favorite companies to follow, but it has been difficult to invest in over the past few years. Unlike most financials, Goldman rebounded rapidly after the financial crisis, only to dive again in late 2011. Shares are up considerably this year, but are still a long way below their pre-crisis $250 share price. Despite the roller-coaster ride, I still believe that Goldman Sachs Group, Inc. (NYSE:GS) represents the “smartest guys on Wall Street” as they have been referred to, and after pulling back by more than 10% from the 52-week high reached in early June, maybe it is time to take another look. Is this a pullback to take advantage of, or is one of Goldman’s peers a better value?

Who is Goldman Sachs?

One of the largest and most respected investment banking companies in the world, Goldman Sachs Group, Inc. (NYSE:GS) has almost $1 trillion in assets. The company operates in four segments, the largest of which is the Institutional Client Services segment, which makes up 53% of Goldman’s revenues. This segment is made up of Goldman’s market-making activities as well as its securities services business.

Other segments include Investment Banking (15% of revenues) which includes financial advisory services as well as the company’s underwriting operations. Investment Management (also 15%) offers investment strategies and advice, as well as a range of services to mutual funds, pension funds, and high-net worth individuals. Investing and Lending (17%) is the most exciting, in my opinion, and includes Goldman Sachs Group, Inc. (NYSE:GS)’s revenue (or losses) from its proprietary trading and lending activities.

The smartest guys on the street?

Goldman Sachs has a controversial reputation, especially since the financial crisis, but one thing that is universally agreed upon is that Goldman attracts and retains some of the best talent on Wall Street, and they are willing to pay for it. Goldman Sachs Group, Inc. (NYSE:GS) pays out about 40% of its total revenues in compensation, as they believe that talent recruitment and retention are what will give them a leg up.

During the crisis, Goldman initially profited about $4 billion by betting on a collapse of the subprime mortgage market, but things soured for the firm as the crisis went on. In September 2008, just after Goldman Sachs Group, Inc. (NYSE:GS) agreed to become a bank holding company, Warren Buffet made a $5 billion investment in Goldman, calling it “a bet on brains.” However, the U.S. Treasury also kicked in $10 billion as part of TARP, and Goldman stirred up major controversy by giving out over $1 billion in employee bonuses in that same year.

The numbers

Despite the rise in share price over the past year, Goldman Sachs Group, Inc. (NYSE:GS) still trades at a relatively cheap valuation, as do most financials at the present time. Goldman is expected to earn $14.51 per share in 2013, meaning that shares currently trade for just 10.4 times this year’s earnings. The consensus calls for Goldman to increase its earnings to $15.35 and $16.00 over the next two years, as the continuing improvement in the economy should greatly help Goldman’s client-service based businesses.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!