Another Dangerous Bubble Warning...

Investment Analysis Clubs Saul’s Investing Discussions
1

Goldman and their analysts think every growth stock we tend to track on this board is overvalued. lol. Herein, Goldman lists 39 stocks, which they warn are not headed for a crash, per se, but will underperform.

I don’t think anyone here follows these guys, but when there is a correction, they like to say I told you so. But when THEY fail to outperform, we never hear anything about it…

Goldman Sachs warns of a dangerous bubble in these 39 stocks
Brian Sozzi·Editor-at-Large

Goldman Sachs isn’t yet ready to state the euphoric stock market is one big bubble nearing an epic pop all over the faces of Wall Street bulls, but it is warning investors about some stocks.

“Equity valuations are extremely elevated on an absolute basis. But after taking low interest rates into account, the aggregate index actually trades below average historical valuation,” Goldman’s U.S. equity chief David Kostin says.

Collectively, this list of 39 stocks has gained 6% year-to-date versus a 2% lift on the S&P 500. They sport a trailing-12 month enterprise value-to-sales ratio of 54 times, nearly 15 times the S&P 500 median. On a forward basis, the cohort trades on an enterprise value-to-sales ratio of 29 times, compared to four times for the S&P 500 median.

Kostin stops short of saying these 39 stocks are headed for a crash. Instead, he thinks they could relatively underperform over the next 12 months likely as the financial results of the companies fail to live up to the market hype.

The actual list of 39 stocks is a graphic embedded in the article.
Here is the link:https://finance.yahoo.com/news/goldman-sachs-warns-of-a-dang…

12 Likes
2

I love seeing the word “dang” in links, even if it’s a coincidence of truncation. It makes me think Goldman Sachs is warning of “a dang rough road up ahead in that there tech-stock holler, y’all.” : )

I only found 9 of my 16 current holdings on this list, so maybe there are some good contrarian tips in here; if this dude and his team think they’re going to lag and they’re thinking incorrectly, maybe I could do even better. This was a coffee-spitter, though:

Kostin’s group of financial modelers is sending a warning to investors in the tech space that continue to blindly trade momentum instead of paying any attention to fundamentals.

Wow, I had no idea that’s what we were doing here [yes I’m being obtuse]. I can’t wait to hurry up and ignore those bean-heads’ warnings, largely because (a) I’m not investing for a quarter or a year, and (b) I don’t do tea leaves. I don’t know whether it’s robots and MIs that are ‘propping multiples up’ or ‘keeping this bubble inflated’, but I don’t have any qualms about my portfolio based on this information. Along those lines, he closes with,

“Since 1985, the median stock trading at an enterprise value-to-sales multiple above 20 times has garnered a subsequent 12-month return of -1%, compared with 6% for the median U.S. stock.”

Wow, 1985, you say? Cool how high-multiple companies today are just like those in the 80s/90s (not to mention the early 2000s). NOT. And 12-month returns? Meh. Again with the Housel thing: Goldman’s playing something of a different game from the one I am.

-n8 (holdings at profile)

27 Likes