Goldman Sachs (GS)

Goldman Sachs is an incredible franchise, not expensive as it trades at slightly above book value and a low PE. GS stayed with fixed income whereas other investment banks cut back aggressively, because this area drained capital and reduced ROE. GS is one of the top investment banks.

(A Top Pick May 24, 2017. Up 4%). This company is doing well but it disappointed investors when it didn’t announce buybacks in its last earnings call. He thinks Goldman is acting responsibly and putting its money to work on growth. Late cycle business activity includes a lot of mergers and acquisitions, which Goldman Sachs will benefit from. They are also continuing to grow their bank and earning good returns. The growth rate from investing their cash flow in this is better than investors would get from dividends and buybacks. He is buying the company on its dip, expecting the stock to rise as interest rates rise.

They just bought some more today. Trading at 10 times earnings. Their capital markets business is booming. Very smart investment bankers. (Analysts’ price target is $272.77)

They have gone full throttle in the riskier business of trading derivatives. They are the only one of the big banks going full throttle. They have fewer shares outstanding than before the financial crisis.

He sold Goldman Sachs and bought Morgan Stanley less than a year ago. Goldman had fixed-income problems whereas Morgan Stanley developed a successful wealth management business, benefitting from lots of trading volume these days.

Trading at only 12x earnings. While other Wall St. banks have reduced traded derivatives, Goldman hasn't. A huge opportunity. Margins will increase in this area, because of less competition. The number-one investment bank in the world, benefitting huge from European M&A. Expects 50% earnings growth in three years. (Analysts' price target $270.63)

He's positive on more M&A in U.S. banks given de-regulation. Expects lots of activity, like expanding banking services.

The low volatility limited trading profits at GS. Boy, that has changed. It's much better now. He's bullish. Also owns J.P. Morgan for the global reach, and owns Goldman for the investment banking.

Best time to be a US bank. Tax reform. Deregulation. Rising interest rates. This company makes a lot of money on volatility. Now that is back, earnings are going to benefit. (Analysts’ price target is $ 271.38)

The banking industry as a whole is cheap. This is a very special company. Not expensive. Trading at 1.2X Book. Their "fixed business", such as fixed income, interest rates and commodity business, uses a lot of capital. They are one of the few companies that didn't slim down. That’s hurt them in the last several quarters. However, looking at any kind of metric in investment banking, they are amongst the top 5 where you have to be to make a lot of money. A very premier name and continues to have a lot of cache in it. Very low dividend yield of 1.3%.

(A Top Pick Dec 19/16. Up 9%.) He likes the US financials, but has moved away from this in favour of Morgan Stanley (MS-N). Didn't feel it was executing as well as it should have been. Trading volumes have been low, and he wanted to move more towards the retail opportunity in addition to capital markets.

(A Top Pick Aug 8/16. Up 47%.) All global investment banks are benefiting as interest rates start to rise. This one has done what almost no one else has done, which is not reducing exposure to the riskier trading parts of the business. Their global footprint is almost 2^nd to none today. They have good exposure in Europe, whose economy is slowly recovering.

The whole banking sector is going to do better. It is a great place to hide. It has been a tough road because regulators have not exited the space yet. Once they go these things could have another leg on them. He has BAC-N.

A name that bodes very well in terms of their offering. Trading at about 1.23 X Price to Book, not a bad valuation relative to the rest of the street. Stock has been flattening a little more recently. A name that would be on his radar.

He likes this. It is not expensive and pays a decent dividend. A couple of things have happened that has hurt. Other companies cut back on fixed income, currency and commodity (FCC) side of the business because it is a very highly intensive capital business from a regulatory point of view. Goldman decided not to do that as much. They are still #1 in cash equities, etc.