Goldman Sachs on commodity prices
In the previous article, we learned that legendary investment company Goldman Sachs has an optimistic view on commodities, and it believes that it could see a 10% upside in the coming 12-month period.
The Invesco DB Commodity Tracking ETF (DBC), which tracks the performance of commodity prices, had risen 5.6% year-to-date as of July 10.
In an environment of rising commodity inflation, Goldman Sachs (GS) has advised investors to look at companies with stable and higher profit margins. The recent tax cut should provide a big boost to corporate profits. However, in the present situation, when commodity inflation is rising and the interest rate is gradually picking up, it’s become a bit tough for companies to maintain higher profit margins.
According to Goldman Sachs, “Investors should focus on stocks with high and stable gross margins…The market generally rewards companies with high margins when the outlook for corporate profitability weakens.” Some stocks, such as the Coca-Cola Company (KO), Zoetis (ZTS), Ralph Lauren (RL), Cadence Design Systems (CDNS), and PVH (PVH), are recommended by Goldman Sachs in such an environment, as the company believes that these stocks could provide stable and higher profit margins in such circumstances.
In the next article, we’ll analyze Goldman Sachs’s views on Coca-Cola.