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What Are the Top Stock Picks from Goldman Sachs?

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Jun. 24 2016, Updated 1:04 p.m. ET

Top stock picks

In the previous part, we looked at Goldman Sachs’s investment strategy, which is said to outperform in a flat market (SPY) scenario. It focuses on high operating leverage companies. In this part, we’ll look at high operating leverage stocks that Goldman Sachs (GS) has recommended.

Goldman Sachs’s top stock picks are Adobe Systems (ADBE), Expedia (EXPE), FedEx (FDX), Red Hat (RHT), Boston Scientific (BSX), Bristol-Myers Squibb (BMY), and Sherwin-Williams (SHW). According to Goldman Sachs, these stocks will outperform in the flat market scenario since they have higher operating leverages.

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What do valuations indicate for Adobe Systems?

Adobe Systems is trading at a forward PE (price-to-earnings) multiple of 25.04x. EPS (earnings per share) growth in the last four quarters is showing improvement. The current PE multiple is 60.40x, which indicates that earnings growth may pick up in the future.

Expedia’s PE multiple

Expedia is trading at a forward PE multiple of 16.26x. EPS growth in the last four quarters is showing improvement. Its current PE multiple is 25.21x.

FedEx’s valuation

FedEx is trading at a forward PE multiple of 11.56x. EPS growth in the last four quarters is showing improvement. Its current PE multiple is 44.59x.

The above valuations indicate that earnings may pick up in the near future. They also show that these stocks are trading at a discount.

In the next part, we’ll analyze the difference between the healthcare and materials stock picks.

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