Goldman Sachs (GS)

Great company. This and Morgan Stanley (JPM-N) are going to do very well over the next little while. They are not expensive. Have cut their costs way down. A lot of these companies are flush with cash so there is going to be more M&A that is going to go one. Trading at 11X estimated earnings, which is not expensive.

Trading at about 110% of Book. In this case, Book Value is a really good indicator of valuation and he feels they could trade at 1.5X book, which would take them well over $200. However, some confidence in the boardroom is needed and that is to do more mergers and acquisitions, which he thinks will come. 2014 may be the year.

(A Top Pick Nov 21/12. Up 40.49%.) Still trading at only about 1X Book. In previous cycles, it has gotten up to 2X Book. Not saying it is going to do that, but feels it still has room to go.

IPO market has been pretty hot lately. This is now a commercial bank but, at heart, it is still an investment banking and trading firm. Investment banking is about 15% of their revenue, but has the potential to be much higher. There is a big pipeline of IPO offerings, probably the biggest since 2006.

Split? They used to split to make it easier for small investors to get in but that doesn’t matter now. Trading at 1.9 times book but not getting the results on their equity that allow for them to have this multiple. The confidence is not there.

Went into the Dow on a fairly modest valuation, which he finds intriguing. There is an ongoing recovery in the US banks. This has one of the smartest managements going. Yield of 1.23%.

This one bothers him a little bit. He has never been trustful of what they do with their balance sheets.

Has suffered off its previous 2008 highs but in the last year it has done very well. Recovering along with a lot of the banks. We still haven’t hit a capital markets cycle, which is unusual. Usually capital markets cycle and the M&A cycle is coincidental with the success of the market move. It will happen but not yet. This bank will be a prime recipient when it does.

Normally, at the top of their cycle, they will trade at around 1.5-1.75 times Book and right now they are trading right around Book. Two things could be catalysts for this company. 1.) The volatility we are starting to see re-enter the market is good because they are good at trading. 2.) We will very likely see a capital markets surge with acquisitions, etc.

Tremendous franchise in the investment banking space. His concern with all of the large, money centered banks is their inter-connection to the global financial system. He is not convinced that we are through with banking problems in Europe. Not wildly cheap right now but if it was he would look at it.

(Top Pick Apr 17/12, Up 25.88%) He sold and bought regional US banks for more substantial upside.

Thinks the stock is going to go lower. Trading revenues in the capitals market business are under pressure. This is a big player in the commodities space and commodities are under pressure at this time. There is a lot of negative sentiment against these US investments banks.

People hate this company because of how much they pay out in compensation but, the bottom line is that they are trading below book value. They are generating so much free cash flow Warren Buffett just gave his seal of approval. Company plans to buy back 80 million shares, which is over 15% of its market cap.

Normally does very well from January through until the end of April. Seem to have worked reasonably well this time but we are reaching the end of seasonal strength. Chart shows it has been struggling and has established a short-term downward trend in the last 2 weeks and is below its 20 day moving average and has started to underperform the S&P 500.

(A Top Pick March 21/12. Up 19.18%.) Had bought this when it was very depressed and it had run up so he got out of his position. Great company with a great franchise.