In this piece, we will take a look at the top value stock picks of the investment bank Goldman Sachs.
Value investing is one of the more popular approaches among professional investors, and its fundamentals are also among those that are commonly understood by the general public. While most people might be unaware of using puts and calls to make a stock market return, they are likely to understand that one way to profit from the market is through share price appreciation. However, while share price appreciation is one part of value investing fundamentals, simply relying on it alone is not using value investing. This is because the two central components of this philosophy are fair value and the margin of safety. The fair value is the assumed ‘true value’ of a stock that an investor calculates based on several factors such as business operations and future cash flows. Then, the margin of safety compares the fair value of a stock and its market share price to see whether there is a risk of substantial losses due to share price depreciation after a purchase is made. Stocks with higher margins of safety are ‘safer’ as intuition would suggest.
The philosophy of value investing has been in the market and academia for more than five decades now. Over the course of this time period, it has produced some of the richest people in the world, in perhaps what is the biggest testament to its strength. Some of the biggest names in the finance and hedge fund industry, such as Warren Buffett of Berkshire Hathaway, Leon Cooperman and Seth Klarman of Baupost Group, are known adherents of the value investing approach. With the third quarter hedge fund filing season now over, their latest stock picks are also available.
We’ve taken a look at all these investors’ latest picks too. Starting from Mr. Buffett, the top three stocks in the 12 Best Value Dividend Stocks to Buy According to Warren Buffett are General Motors Company (NYSE:GM), Citigroup Inc. (NYSE:C), and Ally Financial Inc. (NYSE:ALLY). Moving forward to Seth Klarman, the billionaire investor who has also had the honor of editing the latest edition of the value investing bible, Security Analysis, the top three stocks in the list of the 12 Best Value Stocks To Buy Heading Into 2024 (Picked By Seth Klarman) are Willis Towers Watson Public Limited Company (NASDAQ:WTW), The Liberty SiriusXM Group (NASDAQ:LSXMA), and Fidelity National Information Services, Inc. (NYSE:FIS). Finally, the three longest stock picks of Leon Cooperman, the hedge fund billionaire who has been in the finance industry since 1967, are The AES Corporation (NYSE:AES), Microsoft Corporation (NASDAQ:MSFT), and Citigroup Inc. (NYSE:C).
Shifting gears, The Goldman Sachs Group, Inc. (NYSE:GS) is one of the biggest investment banks in the world. It regularly covers tons of different stocks every day as part of its analyst coverage, and the bank’s analyst teams have a unique insight into Wall Street. They regularly analyze all publicly available data to rate stocks, and also stay in touch with managements to try to gain deeper insights into their operations. This lends its investment decisions credibility, but while Goldman’s views on the market and stocks are relied on by countless, these days it is struggling to exit its consumer banking foray. The bank’s revenue dropped by $12 billion last year as rapid interest rate hikes dented the stock market, and nearer to the present, Goldman Sachs’ third quarter of 2023 earnings report saw the bank’s profit post 33% annual drop to $2.1 billion. For a detailed look at the bank’s latest troubles, you can check out Goldman Sachs Semiconductor Stocks: Top 12 Picks.
Today, we’ll look at the top value stocks favored by Goldman Sachs. Some notable names are NRG Energy, Inc. (NYSE:NRG), Ford Motor Company (NYSE:F), and JPMorgan Chase & Co. (NYSE:JPM).
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Our Methodology
To compile our list of Goldman Sachs’ top value stock picks, we ranked the 40 biggest positions in its Q3 2023 investment portfolio by their price to forward earnings ratio. Out of these, the top 12 stocks were chosen as Goldman Sachs’ top value stock picks.
Goldman Sachs Value Stocks: Top 12 Stock Picks
12. The Home Depot, Inc. (NYSE:HD)
Goldman Sachs’ Q3 2023 Investment Value: $1.6 billion
Latest Price To Forward Earnings Ratio: 19.19
The Home Depot, Inc. (NYSE:HD) is an American company that sells home improvement and construction products through its retail outlets. The firm’s shares were under a bit of stress in late November as peer firm Lowe’s cut its 2023 annual outlook on the back of slower demand.
During this year’s June quarter, 68 out of the 910 hedge funds profiled by Insider Monkey had held a stake in The Home Depot, Inc.. In the following quarter, the firm’s largest hedge fund shareholder was Ken Fisher’s Fisher Asset Management since it owns $2.6 billion worth of shares.
The Home Depot, Inc. joins Ford Motor Company, NRG Energy, Inc., and JPMorgan Chase & Co. in our list of Goldman Sachs’ top value stock picks.
11. UnitedHealth Group Incorporated (NYSE:UNH)
Goldman Sachs’ Q3 2023 Investment Value: $2.7 billion
Latest Price To Forward Earnings Ratio: 19.08
UnitedHealth Group Incorporated (NYSE:UNH) is one of the biggest companies in the world with nearly half a million employees. It provides healthcare benefit plans and associated products to Americans. UnitedHealth Group Incorporated’s shares are rated Strong Buy on average and analysts have set an average share price target of $591.
During Q2 2023, 111 among the 910 hedge funds tracked by Insider Monkey had invested in the company. UnitedHealth Group Incorporated’s biggest investor in the September quarter was Rajiv Jain’s GQG Partners due to its $1.6 billion investment.
10. InterDigital, Inc. (NASDAQ:IDCC)
Goldman Sachs’ Q3 2023 Investment Value: $1.5 billion
Latest Price To Forward Earnings Ratio: 17.95
InterDigital, Inc. (NASDAQ:IDCC) is a small software company that provides its products to the consumer electronics and communications industries. The firm’s shares have been on a tear this year, as they have gained 76% on the market year to date.
Insider Monkey dug through 910 hedge funds for their second quarter of 2023 shareholdings and discovered 24 InterDigital, Inc. shareholders. In the third quarter, its largest hedge fund shareholder was Spencer M. Waxman’s Shannon River Fund Management since it owned 642,265 shares that were worth $51.5 million.
9. Berkshire Hathaway Inc. (NYSE:BRK-A)
Goldman Sachs’ Q3 2023 Investment Value: $2.5 billion
Latest Price To Forward Earnings Ratio: 16.45
Berkshire Hathaway Inc. (NYSE:BRK-A) has the unique distinction of being the most expensive share on the stock market. Its latest price is a whopping $549,710, and the price to forward earnings ratio of 16.45 is among the lowest on our list. If you’re unaware, Berkshire Hathaway Inc. is the investment holding company for Warren Buffett, through which it invests in public and private firms.
As of June 2023 end, 109 hedge funds among the 910 that were part of Insider Monkey’s database were Berkshire Hathaway Inc. (NYSE:BRK-B)’s investors. During September 2023, the largest investor was Michael Larson’s Bill & Melinda Gates Foundation Trust courtesy of its $7.8 billion stake.
8. Akamai Technologies, Inc. (NASDAQ:AKAM)
Goldman Sachs’ Q3 2023 Investment Value: $3.4 billion
Latest Price To Forward Earnings Ratio: 16.31
Akamai Technologies, Inc. (NASDAQ:AKAM) is an American cloud based software provider headquartered in Cambridge, Massachusetts. The firm has had a great time on the financial front lately, as it has beaten analyst EPS estimates in all four of its latest quarters.
By the end of this year’s second quarter, 29 out of the 910 hedge funds surveyed by Insider Monkey had invested in the firm. Akamai Technologies, Inc.’s biggest shareholder during Q3 was Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital as it owned 2.2 million shares that were worth $234 million.
7. Johnson & Johnson (NYSE:JNJ)
Goldman Sachs’ Q3 2023 Investment Value: $1.9 billion
Latest Price To Forward Earnings Ratio: 13.83
Johnson & Johnson is an American healthcare giant headquartered in New Brunswick, New Jersey. Its shares created quite a bit of a stir in November 2023, after 13F filings revealed that Warren Buffett’s Berkshire Hathaway completely sold its stake in Johnson & Johnson.
As of Q2 2023 end, 88 out of the 910 hedge funds tracked by Insider Monkey had held a stake in Johnson & Johnson. During Q3, the largest investor was Ken Fisher’s Fisher Asset Management through its $1.1 billion investment.
6. AbbVie Inc. (NYSE:ABBV)
Goldman Sachs’ Q3 2023 Investment Value: $1.6 billion
Latest Price To Forward Earnings Ratio: 12.48
AbbVie Inc. (NYSE:ABBV) is a healthcare and pharmaceutical company headquartered in North Chicago, Illinois. Its shares are rated Buy on average and analysts have set an average share price target of $169.72.
During this year’s June quarter, out of the 910 hedge funds surveyed by Insider Monkey, 74 were the firm’s shareholders. AbbVie Inc.’s biggest shareholder in the September quarter was Paul Marshall and Ian Wace’s Marshall Wace LLP as it held a $582 million stake in the company.
NRG Energy, Inc., AbbVie Inc., Ford Motor Company, and JPMorgan Chase & Co. are some of Goldman Sachs’ top value stocks.
5. Cisco Systems, Inc. (NASDAQ:CSCO)
Goldman Sachs’ Q3 2023 Investment Value: $1.6 billion
Latest Price To Forward Earnings Ratio: 12.36
Cisco Systems, Inc. (NASDAQ:CSCO) is a sizeable company that sells communications and networking products. The firm’s third quarter results were an interesting bunch, as while Cisco Systems, Inc. beat analyst EPS estimates, a guidance cut sent shares tumbling.
By the end of June 2023, 55 out of the 910 hedge funds profiled by Insider Monkey had bought and owned Cisco Systems, Inc.’s shares. During September, Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital was the biggest hedge fund shareholder as it owned 23.7 million shares that were worth $1.2 billion.
4. Exxon Mobil Corporation (NYSE:XOM)
Goldman Sachs’ Q3 2023 Investment Value: $2 billion
Latest Price To Forward Earnings Ratio: 10.24
Exxon Mobil Corporation (NYSE:XOM) is a petro giant with a diversified global presence base and a large retail presence. These days, the firm is aggressively interested in expanding its presence in the lithium market. However, the plans might hit a snag as prices surprisingly crashed in November 2023.
71 out of the 910 hedge funds part of Insider Monkey’s second quarter of 2023 database had held a stake in the oil giant. Exxon Mobil Corporation’s largest stakeholder in the third quarter was Jean-Marie Eveillard’s First Eagle Investment Management due to its $1.5 billion investment.
3. JPMorgan Chase & Co. (NYSE:JPM)
Goldman Sachs’ Q3 2023 Investment Value: $2.6 billion
Latest Price To Forward Earnings Ratio: 10.06
JPMorgan Chase & Co. is one of the biggest private banks in the world. The firm’s CEO, Mr. Jamie Dimon was out with a rather dark warning for investors in its Q3 2023 earnings call when he shared that the world might be seeing ‘the most dangerous time’ in decades.
Yet, in the previous quarter, 106 out of the 910 hedge funds polled by Insider Monkey were JPMorgan Chase & Co.’s investors. During Q3, its biggest hedge fund shareholder was Ken Fisher’s Fisher Asset Management courtesy of a $1.6 billion stake.
2. NRG Energy, Inc. (NYSE:NRG)
Goldman Sachs’ Q3 2023 Investment Value: $2.4 billion
Latest Price To Forward Earnings Ratio: 7.86
NRG Energy, Inc. is an American electricity provider and trader headquartered in Houston, Texas. Following disastrous earnings performance during its four latest quarters and a Q3 sizeable stake increase (275%) by activist investor Elliot Management, the firm’s CEO was replaced in November 2023 as part of what appears to be a turnaround effort.
Insider Monkey scoured through 910 hedge fund portfolios for their June quarter of 2023 shareholdings and discovered that 39 had invested in the firm. NRG Energy, Inc.’s largest investor in the succeeding quarter was Paul Singer’s Elliott Management since it owned 10.3 million shares that were worth $399 million.
1. Ford Motor Company (NYSE:F)
Goldman Sachs’ Q3 2023 Investment Value: $1.4 billion
Latest Price To Forward Earnings Ratio: 5.74
Ford Motor Company is one of the biggest car manufacturers in America. November 2023 restored calm at the firm after it entered into a fresh deal with union workers after a historic strike. The stock is rated Buy on average and analysts have set an average share price target of $13.13.
During Q2 2023, 40 out of the 910 hedge funds profiled by Insider Monkey had bought and owned Ford Motor Company’s shares. Ken Fisher’s Fisher Asset Management was the biggest shareholder during the September quarter, courtesy of its $690 million investment.
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This article is originally published at Insider Monkey.
