We recently published a list of 10 Most Profitable Value 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 profitable value stocks to buy now.
Matt Powers, Managing Partner at Powers Advisory Group, joined the discussion on CNBC’s ‘Power Lunch’ on March 11 to provide insights into the shift from growth to value investing and the resurgence of traditional dividend strategies. Powers emphasized that this transition has become increasingly evident, particularly following last week’s market activity and the events of March 10. He noted that while the market behavior on March 11 might tell a slightly different story, the broader trend is unmistakable. For years, growth stocks dominated portfolios, but now investors are gravitating toward value and dividend investing, which had been largely overlooked for over a decade. Powers attributed this shift to various catalysts, which included tariffs and policy uncertainty from Washington and President Trump’s unpredictable stances. He described investors as exhausted, and welcomed the normalization of equity markets and a return to diversification and traditional investing.
Powers highlighted the importance of diversification, contrasting high-growth portfolios with those focused on dividends. He pointed out that ETFs have outperformed large-cap growth funds year-to-date, with a notable 11-point difference in returns. The dividend fund is up 5%, while the large-cap growth fund is down 6%. He explained that tech stocks dominate large-cap growth funds and account for nearly half of their portfolios. In contrast, dividend-focused funds are more diversified across sectors such as healthcare, financials, and staples. This diversification reduces concentration risk and provides defensive characteristics in an uncertain market environment. Powers elaborated on the leadership shift between these two types of funds. While growth ETFs feature holdings like the MAG7, dividend ETFs focus on blue-chip companies. A year ago, growth stocks were investor favorites, but now value stocks are taking the lead, which is a trend reflected in their performance. He stressed the importance of broadening diversification within portfolios and not ignoring value opportunities.
Methodology
We sifted through the Finviz stock screener to compile a list of the top stocks with a forward P/E ratio under 15. We then selected the 10 stocks with a TTM net income greater than $1 billion and 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.
Note: All data was recorded on March 13.
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).
An aerial shot of a regional bank with its numerous branches situated in a city.
Goldman Sachs Group Inc. (NYSE:GS)
TTM Net Income as of March 13: $14.276 billion
Forward P/E Ratio as of March 13: 11.53
Number of Hedge Fund Holders: 81
Goldman Sachs Group Inc. (NYSE:GS) is a financial powerhouse that offers services across investment banking, trading, asset and wealth management, and platform solutions. It serves corporations, governments, and individuals. It provides everything from M&A advisory and underwriting to investment management, wealth planning, and transaction banking.
In Q4 2024, the firm’s Asset & Wealth Management segment reached a record $3.1 trillion in managed assets. This segment provides investment and advisory services to both individuals and institutions. Its consistent fee-based income is vital for the company’s overall value. The firm is moving away from direct equity and debt investments and is prioritizing fee-generating activities. To capture a larger share of the expanding private credit market, it has launched the Capital Solutions Group, which uses investment banking and market expertise to offer financing and risk management solutions.
Goldman Sachs Group Inc. (NYSE:GS) is focused on digital expansion and is growing its fund offerings. The firm is refining wealth management strategies and is aiming for high-single-digit annual growth. It’s also cutting costs and using AI and automation to boost efficiency.
Ariel Appreciation Fund favors the company due to its strong quarterly earnings, expected benefits from a new political administration’s policies, and the positive outlook on its core businesses. Here’s what the fund stated regarding Goldman Sachs Group Inc. (NYSE:GS) 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, Goldman Sachs Group Inc. (NYSE:GS) ranks 9th on our list of the most profitable value 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 timeframe. 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.