Goldman Sachs Stock Portfolio: Top 5 Large-Cap Stock Picks

In this article, we discuss the top 5 large-cap stock picks of Goldman Sachs. If you want to see more stocks in this selection, check out Goldman Sachs Stock Portfolio: Top 10 Large-Cap Stock Picks. 

5. Splunk Inc. (NASDAQ:SPLK)

Number of Hedge Fund Holders: 47

Splunk Inc. (NASDAQ:SPLK) is a California-based company that offers software for searching, monitoring, and analyzing machine-generated data. According to investment advisory Needham, Splunk Inc. (NASDAQ:SPLK) may be worth about $120 per share in a possible acquisition, whereas client expectations for a Splunk takeout are around $110-$130 per share. In February 2022, Cisco Systems, Inc. (NASDAQ:CSCO) made a more than $20 billion buyout offer for Splunk. 

Securities filings for the second quarter of 2022 reveal that the Goldman Sachs stock portfolio had more than 43 million shares of Splunk Inc. (NASDAQ:SPLK), worth $4 billion and representing 0.91% of the total 13F holdings. 

On November 2, BTIG analyst Gray Powell maintained a Buy rating on Splunk Inc. (NASDAQ:SPLK) but slashed the price target on the stock to $105 from $132 as part of a broader research note on Security & Infrastructure Software. The analyst noted that while Splunk Inc. (NASDAQ:SPLK)’s security/SIEM side of the business appears relatively stable, he is seeing some signs of pricing constraints on contract renewals.

According to Insider Monkey’s data, 47 hedge funds were bullish on Splunk Inc. (NASDAQ:SPLK) at the end of June 2022, compared to 42 funds in the prior quarter. Alex Sacerdote’s Whale Rock Capital Management held the leading position in the company, comprising 2.7 million shares worth $243 million. 

Here is what Carillon Tower Advisers specifically said about Splunk Inc. (NASDAQ:SPLK) in its Q2 2022 investor letter:

“Splunk Inc. (NASDAQ:SPLK), a leader in artificial intelligence solutions for corporate data logs and security, fell in a weak tech group. The company has been transitioning to more of a software-as-a service (SaaS) business model that has, we believe, temporarily depressed earnings and cash flow. We like Splunk’s leadership position in the industry and the company has installed a new CEO and is rolling out new features and products.”

4. DexCom, Inc. (NASDAQ:DXCM)

Number of Hedge Fund Holders: 56

DexCom, Inc. (NASDAQ:DXCM) is a California-based company that focuses on the design, development, and commercialization of continuous glucose monitoring systems in the United States and internationally. On October 27, DexCom, Inc. (NASDAQ:DXCM) reported its Q3 results, posting a non-GAAP EPS of $0.28 and a revenue of $769.6 million, outperforming market estimates by $0.04 and $18.56 million, respectively. 

Securities filings for the second quarter of 2022 reveal that Goldman Sachs had 32.7 million shares of DexCom, Inc. (NASDAQ:DXCM) in its portfolio, worth $3 billion and representing 0.67% of the total holdings. 

Cowen analyst Joshua Jennings on October 28 raised the price target on DexCom, Inc. (NASDAQ:DXCM) to $114 from $85 and reiterated an Outperform rating on the shares. The analyst noted DexCom, Inc. (NASDAQ:DXCM) increased the lower end of its full-year sales guidance and reiterated its targets for operating margin and EBITDA.

Among the hedge funds tracked by Insider Monkey, 56 funds reported owning stakes worth $1.10 billion in DexCom, Inc. (NASDAQ:DXCM) at the end of June 2022, compared to 58 funds in the prior quarter worth $1.4 billion. Ken Griffin’s Citadel Investment Group is the leading position holder in the company, with more than 3 million shares valued at $229 million. 

Here is what ClearBridge Large Cap Growth ESG Strategy has to say about DexCom, Inc. (NASDAQ:DXCM) in its Q2 2022 investor letter: 

“Multiple compression has also hurt higher growth health care companies like DexCom (NASDAQ:DXCM), despite its strong fundamentals. We continue to build out the position as we gain greater visibility on the catalysts of accelerating uptake in Type 2 diabetes patients and the launch of its G7 continuous glucose monitor in the U.S. and Europe. DexCom was hurt in the quarter by market speculation that it would acquire a diabetes pump provider, which would be outside of its core competency.”

3. Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 72

Block, Inc. (NYSE:SQ) is a California-based payments technology firm. Securities filings for Q2 2022 reveal that the Goldman Sachs stock portfolio featured 21.4 million shares of Block, Inc. (NYSE:SQ), worth $2 billion and representing 0.45% of the total holdings. Block, Inc. (NYSE:SQ) acquired Afterpay in early 2022 to gain entry to the rapidly growing BNPL sector. Afterpay has enhanced its “Buy Now, Pay Later” category to include an option for monthly payments on purchases of between $400 and $4,000. 

On November 1, Evercore ISI analyst David Togut added Block, Inc. (NYSE:SQ) to the firm’s “Tactical Underperform” list ahead of the company’s Q3 earnings report, stating that he sees “7 reasons to sell SQ stock.” He kept an Underperform rating and a $49 price target on Block, Inc. (NYSE:SQ).

According to Insider Monkey’s data, 72 hedge funds were long Block, Inc. (NYSE:SQ) at the end of June 2022, compared to 84 funds in the prior quarter. Cathie Wood’s ARK Investment Management is the largest position holder in the company, with 9.13 million shares worth $799.45 million. 

In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:

“Block, Inc. (NYSE:SQ) provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell due to mixed quarterly results with more modest growth in the Seller business offsetting strength in Cash App. While integration of recently acquired Afterpay is progressing well and credit metrics remain healthy, the buy-now-pay-later business slowed due to greater competitive intensity. We continue to own the stock due to Block’s long runway for growth, sustainable competitive advantages, and unique corporate culture.”

Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”

2. S&P Global Inc. (NYSE:SPGI)

Number of Hedge Fund Holders: 84

S&P Global Inc. (NYSE:SPGI) is a New York-based credit rating and data analytics company which operates through six divisions – S&P Global Ratings, S&P Dow Jones Indices, S&P Global Commodity Insights, S&P Global Market Intelligence, S&P Global Mobility, and S&P Global Engineering Solutions. S&P Global Inc. (NYSE:SPGI) reaffirmed its expectation to conclude its accelerated share repurchase program of $12 billion by the end of this year.

On November 1, Argus analyst John Eade reiterated a Buy rating on S&P Global Inc. (NYSE:SPGI) but slashed the firm’s price target on the shares to $365 from $420. The analyst believes S&P Global management can navigate the rising inflation and high interest rate environment well.

According to Insider Monkey’s data, 84 hedge funds were bullish on S&P Global Inc. (NYSE:SPGI) at the end of June 2022, compared to 97 funds in the last quarter. Chris Hohn’s TCI Fund Management is the largest stakeholder of the company, with 8.76 million shares worth approximately $3 billion. 

Here is what Baron Durable Advantage Fund has to say about S&P Global Inc. (NYSE:SPGI) in its Q2 2022 investor letter:

“Another example is S&P Global (NYSE:SPGI), the leading rating agency and data provider, whose stock declined 29.0% year-to-date and 17.5% during the second quarter as a result of growing investor concerns over the slowdown in debt issuance. While debt issuance volumes have seen a dramatic decline – the worst quarterly decline in a decade (down 41% year-over-year in the second quarter based on Goldman Sachs estimates), – and this led management to withdraw its 2022 guidance in early June, we do not believe it would result in a permanent loss of capital.

First, ratings represent only about 30% of S&P Global’s total revenues. Second, despite inherent volatility in quarterly or annual issuance, over the long-term issuance volumes follow the trends in levels of debt outstanding, which has compounded in the mid-single digits for many years. Lastly, we believe that S&P Global’s strong competitive positioning will enable it to continue benefiting from pricing power, while taking advantage of secular tailwinds such as the growth in passive and ESG investing, international expansion, and the growing demand for data analytics.”

1. Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 106

Alibaba Group Holding Limited (NYSE:BABA) is a Chinese technology and e-commerce conglomerate. In Q2 2022, the Goldman Sachs stock portfolio had 25.3 million shares of Alibaba Group Holding Limited (NYSE:BABA) worth $2.8 billion, representing 0.65% of the total 13F securities. 

On November 1, Truist analyst Youssef Squali maintained a Buy recommendation on Alibaba Group Holding Limited (NYSE:BABA) but slashed the firm’s price target on the shares to $125 from $135. The company is forecasted to return to positive growth in Q2 2023 amid consistent macro constraints. China retail sales data shows improving trends from July onwards, and growth should speed up more in the second half of FY23, the analyst added.

According to Insider Monkey’s data, 106 hedge funds were bullish on Alibaba Group Holding Limited (NYSE:BABA) at the end of June 2022, compared to 100 funds in the prior quarter. Ken Fisher’s Fisher Asset Management featured as the largest stakeholder of the company, with 14.5 million shares worth $1.6 billion. 

Here is what Artisan Partners specifically said about Alibaba Group Holding Limited (NYSE:BABA) in its Q3 2022 investor letter:

“Alibaba Group Holding Limited (NYSE:BABA) declined 30% during the quarter primarily due to the continued impact of China’s zero-COVID policy. In August, more than 70 Chinese cities with 300 million combined population were in some state of lockdown. Unfortunately, this comes on top of the other regulatory and competitive challenges that had previously been pressuring Alibaba’s shares over the past year. The painful decline in the share price has made Alibaba a poor investment so far—for good reason. In the second quarter, core online e-commerce revenues were down 10%, and adjusted profits declined 18%. That said, Alibaba shares are priced for this terrible environment to continue forever, and many of the exogenous issues should eventually abate. Signs suggest the regulatory pressure is already easing. The government has been stepping in with economic stimulus. The zero-COVID policy must eventually end. In addition, Alibaba’s management has taken important steps to improve profitability by reducing investments in loss-making new business ventures. When the environment improves, we believe that Alibaba’s core business franchises will return to growth, and profits will follow. The disconnect between Alibaba’s price and value continues to be one of the biggest we have seen in our careers.”

You can also take a look at 10 Best Infrastructure Stocks To Buy Now and 10 Best Natural Gas Dividend Stocks To Buy. 

Follow Insider Monkey on Twitter