The tide is turning. Goldman Sachs is now calling an end to
an investing strategy it first recommended two years ago.
“For the past two years we have consistently advocated buying strong balance sheet stocks, but we believe the risk-reward has shifted in favor of closing this recommendation,” Goldman Sachs’ equity strategist David Kostin wrote on February 8. “We no longer recommend strong balance sheets.”
These ‘strong balance sheet’ stocks include major names like Facebook (FB), Alphabet (GOOGL) and Costco (COST). So far this strategy has done very well for investors. Goldman Sachs’ basket of 50 strong balance sheet stocks outperformed weak balance sheet stocks by 25 percentage points since early 2017.
However the Fed’s recent dovish commentary indicates that the hiking cycle may have come to an end. This should ease pressure on corporate balance sheets- and led Kostin to make the following observation: “Our recent research showed that strong balance sheets are among the worst performing factors during the 12 months following the end of Fed hiking cycles, when U.S. Treasury yields typically also decline.”
Plus the firm’s optimistic outlook for the economy is also a
boost to weaker balance sheet stocks. Investors tend to rotate to strong
balance sheet stocks in times of weak or decelerating economic growth.
So which stocks should you be looking at now? Here are four stocks that all have a comparatively weaker balance sheet. Plus we used TipRanks’ market data to ensure that these stocks also boast bullish Street sentiment. As you will see, that means a ‘Strong Buy’ analyst consensus based on all ratings from the last three months.
Let’s take a closer look now:
Delta Airlines (DAL– Research Report)
Despite the government shutdown costing DAL $25 million in
revenue for January, this stock still gets the thumbs up from the Street.
The airline carrier recently reported fourth quarter
earnings that beat expectations thanks to strong travel demand. Delta’s total
revenue rose to $10.74 billion during Q4, up 5% year-over-year.
As Tigress Financial’s Ivan Feinseth (Track Record & Ratings) notes, a strong economy, low unemployment and increases in consumer spending are driving record levels of airline travel.
That’s reflected in the company’s ‘Strong Buy’ consensus and
26% upside potential.
AT&T (T– Research Report)
AT&T is a leading provider of IP, broadband, video, and
wireless services. And through its recent Time Warner acquisition it is now a
top four producer of content globally.
2019 is about positioning for better services growth in 2020 and beyond says Oppenheimer’s Timothy Horan (Track Record & Ratings). Horan, like most of the Street, currently has a buy rating on T stock. That’s with a $41 price target for 38% upside potential.
T has the ability to integrate its services in unique ways, with
substantial room to use virtualized technologies to greatly reduce operating
and capital expenditures. “We believe that combined with TWX, FCF/share could
grow 6% per year” writes the analyst.
CBS Corp (CBS– Research Report)
This mass media stock is gearing up for its earnings report, set for after the close on February 14. Ahead of the results, top Barrington Research analyst James Goss (Track Record & Ratings) has reiterated his CBS buy rating with a $72 price target. That indicates compelling upside potential of 49%.
According to Goss, CBS has a robust pipeline of original
content lined up for its OTT platforms, Showtime and CBS All Access.
Indeed the success of its OTT platforms in attracting
subscribers is now pacing a year ahead of schedule, with the estimated eight
million subscribers by the end of 2019, instead of 2020.
“In addition to having better ad monetization capabilities
through improved targeting and data capabilities, the company also monetizes
those consumers on a much more attractive rate compared to traditional linear
distribution” Goss writes.
General Motors (GM– Research Report)
“Motoring into 2019” cheers RBC Capital’s Joseph Spak (Track Record & Ratings). He made the comment following the company’s solid 4Q18 earnings results.
The details of the quarter – which were strong – should lead investors to have more confidence in 2019 EPS says Goss. For example, management guided tax rate to 16-18%; versus the expected 20%.
Plus the analyst continues to view GM’s transformation as
underappreciated. “Recent restructuring actions that should lead to ~$4.5bn
savings run-rate in 2020 significantly improves GM’s positioning” he writes.
And it seems like the Street agrees. If we zero in on
top-performing analysts, we can see GM holds only buy ratings right now:
Enjoy the Research Report on the Stocks in this Article:
Here we looked at recommendations from just one firm. But TipRanks tracks over 5,000 analysts from across Wall Street. This means you can get the latest stock picks from analysts with the strongest track record on a daily basis. Which stocks are the top-performing analysts recommending right now? Go to the Analysts’ Top Stocks Tool now
The post Goldman Sachs: 4 ‘Strong Buy’ Stocks For A Brand-New Investing Strategy appeared first on TipRanks Blog.
Source: TipRanks Blog