We recently published a list of 12 Most Undervalued Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Goldman Sachs Group Inc. (NYSE:GS) stands against other most undervalued large cap stocks to buy now.
On March 4, David Katz, Chief Investment Officer at Matrix Asset Advisors, joined ‘The Exchange’ on CNBC to share his perspective on the current state of the bull market and what February’s mixed action and sector rotation might signal for the rest of the year. Katz acknowledged that while people might not want to hear it, the volatility seen in February is likely to persist throughout the year, with both upside and downside movements. He emphasized that this creates opportunities for investors but also necessitates caution. Katz highlighted several positive factors supporting the market, which included a strong economy and solid corporate performance. However, he expressed concerns about certain policies from the administration, such as tariffs, immigration, and the relationship with the Fed. While these issues have been largely ignored by the market so far, Katz warned that they could eventually lead to a 3-5% correction. Despite this, he remained optimistic about the economy’s ability to navigate these challenges and recommended buying into market dips rather than chasing rallies.
To support his sentiment, Katz pointed to companies that have already experienced significant corrections and are positioned to perform well regardless of broader market movements. He highlighted their strong fundamentals, attractive valuations (most trading at under 13-14 times earnings), and good outlooks. He also noted that last year’s market leaders have slowed significantly, while sectors that underperformed are beginning to show meaningful improvement, a trend he expects to continue. This sector rotation suggests that investors should be prepared to adapt their strategies as different sectors gain momentum throughout the year.
Methodology
We used the Finviz stock screener to compile a list of the top stocks trading between $10 billion and $200 billion. We then selected stocks with a forward P/E ratio under 15 and made a list of 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Goldman Sachs Group Inc. (NYSE:GS)
Forward Price-to-Earnings Ratio as of March 4: 13.4
Number of Hedge Fund Holders: 81
Goldman Sachs Group Inc. (NYSE:GS) provides financial services across investment banking, asset and wealth management, and platform solutions. Through its three main segments, it offers strategic advisory, trading, and underwriting services, manages assets across various asset classes, provides wealth management and private banking, and delivers digital financial solutions.
The firm’s Asset & Wealth Management managed a record $3.1 trillion in assets in Q4 2024. This segment manages investments and provides financial advice for individuals and institutions to grow their wealth. The segment’s stable fee-based income is crucial for the company’s market valuation. The firm is shifting away from equity and debt investments to focus on capital-efficient and fee-generating activities. To capitalize on the growing private credit market, the company created the Capital Solutions Group. This initiative combines investment banking and market expertise to offer services in financing, origination, structuring, and risk management.
The firm is investing heavily in digital capabilities, scaling fund programs, and developing new wealth client strategies. These efforts are expected to drive high-single-digit annual growth. Additionally, Goldman Sachs Group Inc. (NYSE:GS) is optimizing expenses and using AI and automation to improve efficiency.
Ariel Appreciation Fund is positive on Goldman Sachs Group Inc. (NYSE:GS) due to its strong quarterly earnings, expected benefits from a new political administration’s policies, and the positive outlook on its core businesses and the overall economy. It stated the following in its Q4 2024 investor letter:
Several stocks in the portfolio delivered solid returns in the quarter. Global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS) outperformed on a robust quarterly earnings beat, highlighted by strength across its investment banking, trading and asset management segments. Meanwhile, the U.S. election has been widely viewed as a positive catalyst across the industry. Investors expect the incoming administration to 1 The “Magnificent Seven” are the largest stocks in the S&P 500 Index driving market performance: Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), NVIDIA Corp. (NVDA) and Tesla, Inc. (TSLA). 2 Hobson, Mellody and John W. Rogers Jr. “What the Stock market Taught Us This Year: Don’t Fall for These Investing Traps.” Wall Street Journal, 5 December 2023. emphasize deregulation and exhibit a greater openness to business combinations compared to the prior regime. Hence, management’s positive commentary around the operating momentum of its core franchises, an improving M&A outlook and the resilience of the U.S. economy sent shares higher.
Overall, GS ranks 6th on our list of most undervalued large cap stocks to buy now. While we acknowledge the growth potential of GS as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.