When a caller mentioned that they are looking to add to their position in The Goldman Sachs Group, Inc. (NYSE:GS) during the September 29 episode of Mad Money, Jim Cramer said:
I like all of your ideas. The one that I think is the most down, that I think could turn if we get this bond rally… is Goldman Sachs. It’s come down greatly, and I think it’s doing incredibly well. I think David Solomon’s, he’s got 4x gains there if you use total return, which is what I like to use.
You can also read: “Goldman Sachs Looks to Deepen its Footprint in Credit”
Global Underwriting Resurgence and Wealth Management Scale
A powerful recovery in global deal-making and capital markets activity catalyzed The Goldman Sachs Group, Inc.’s second-quarter performance, translating market momentum directly into top-line expansion. For the quarter, the firm posted net revenues of $20.34 billion, a 39.5% year-over-year jump, along with net earnings of $6.63 billion and diluted EPS of $20.98, clearing consensus expectations by $6.44. The Global Banking & Markets unit served as the primary catalyst, generating $15.52 billion in net revenues (up 53% year-over-year), fueled by a 55% surge in investment banking fees to $3.4 billion. Meanwhile, management’s long-term push to scale fee-based streams gained traction, lifting Asset & Wealth Management net revenues 20% year-over-year to $4.6 billion as total assets under supervision reached a record $4.04 trillion.
Valuation, Cyclical Pressures, and the Bear Case
Trading at a forward price-to-earnings multiple of roughly 13.2x, The Goldman Sachs Group, Inc. is valued roughly in line with the investment banking industry average of 13.1x. While this premium reflects the market’s respect for its elite investment banking franchise, it also introduces cyclical vulnerability. Major financial institutions remain acutely sensitive to fixed-income volatility, yield curve shifts, and sudden freezes in credit markets. If the anticipated bond rally slows down or global deal-making momentum stalls, the stock lacks a deep defensive margin of safety. Any disappointment in underwriting fee recovery or asset management inflows risks triggering multiple compression as investors reassess peak-cycle expectations.
Institutional Ownership and Market Sentiment
According to Insider Monkey database metrics tracking over 1000 hedge funds, 92 hedge funds held positions in Goldman Sachs at the close of the second quarter, expanding from 83 funds in the prior quarter. With nearly 7 million shares, Fisher Asset Management was the company’s top hedge fund holder in Q2. At the same time, short seller activity remains subdued, with short interest standing at 2.39% of the public float as of mid-September.
Cramer’s thesis rests on Goldman Sachs benefiting if the bond rally continues. The Goldman Sachs Group, Inc. showed in the second quarter how quickly its earnings jump when corporate borrowing and merging pick up, but its 12.5x forward P/E leaves little safety net if high interest rates keep boardrooms cautious. For investors who expect lower rates to spark a broader recovery in Wall Street dealmaking, the stock’s recent dip looks like a sensible entry point into a top-tier bank.
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