Goldman Sachs (GS)

Will benefit from more M&As expected in 2025.

The question was on his preference of this group of wealth management companies. He owns all three for different reasons. The possible lack of regulation under the new administration has already boosted them. They are in excellent financial shape and have good dividend growth. It is not an expensive sector.

Durability of earnings not as high as, say, MS. Earnings are more cyclical. For Q3, surprised even themselves compared to what they were guiding going in. So if even the company doesn't know what to expect, it puts the investor in a tough spot. Still a reasonable business.

They just delivered a blow-out Q3 with  =20% investment banking fees, +16% asset management and $12.7 billion revenue as operating expenses were -8% YOY with 11% tangible equity return. A monster bottom-line beat.

They report tomorrow. Earnings are often predictable, though you don't know what he trading and investment activity will be for GS. He expects earnings to be robust and the messaging positive. For GS he also wants to hear about their foray into retail, though this is absorbed in the stock price. BAC's retail operation has been successful, and he wants to hear about credit delinquencies given that consumer debt is at all-time highs. He expects more of the same from these two banks.

An investment-focused name. Bit more leverage, bit more beta. Likes this space, but it's not as conservative as the money-centre banks.

He bought more GS this week. Their credit cards have been their major overhang; they announced they will get out of the consumer business and are close to a deal with Barclays. The charge-offs could be 10%, twice the industry norm. And who will take the Apple credit cards off their hands? These won't impact GS long term. They did give a target of raising $225 billion in third-party assets to support their wealth management business, which they've already surpassed. Their pipeline has increased a lot, too. Trading revenues are -10%, but last year's comps were so great. Is trading a little over 11x PE 2025.

As long as the CEO continues to execute, the stock will be fine. However, before he was dismayed to watch GS get into ill-fated consumer finance, so it's important they are mostly exiting these businesses and returning to what they DO best: IPOs, capital markets and trading. Technically, it's not good: an RSI of 36 and is partially oversold. It broke the rising 50-day moving average last week. There should be support around $426-430 and would look at it then as a trade but not an investment.

He sold this a few months ago. The net-interest income pressure will challenge the money-centered banks. JPM can withstand that (he owns). For GS, the culture they once had has returned; they have strong underwriting. Volatility will raise their trading revenue in coming quarters. He likes GS and JPM among the money-centred banks. The direction of GS company is great now.

Likes them for managing risk like not helping Musk buy Twitter.

2025 will see a rebound in capital markets activity and underwriting and will benefit banks like GS. GS is up 24% though down 5% today. The FEd will cut rates in September, another tailwind.

Tied to the market. Big capital markets bank that benefits when there's M&A and lots of trading. Yield is ~2.5%, growing at about 20% a year. Returning capital to shareholders. Benefits if we're headed into another economic cycle. Relatively low payout ratio of about 25% of earnings. Really attractive.

Is a top asset manager and investment bank. Will benefit as more IPOs happen. Same with M&As as interest rates tick down. Given these, GS is in the sweet spot. Great managers.

The bank stress test won't impact this either way. GS is in good shape and won't effect their plan to do share buybacks or pay dividends. It's still his favourite bank stock.

Business continues to grown (revenues + earnings). The dominate investment banking & trading business in the world. Also adding "asset management" to product line. Good for long term investors.