Monday, June 23, 2014

Goldman Sachs : 15 cheap stocks for an expensive market

Goldman Sachs doesn't see much standing in the way of more stock-market gains. In a note to clients on Friday, chief U.S. equity strategist David Kostin and his team said they expect the S&P 500 to grind up over the next two-plus years as earnings growth continues, and rolling forward their 12-month price target to 2,000 — 2,100 in 2015 and 2,200 in 2016 are further-out targets. (Note that of the most bearish Wall Street analysts, Deutsche Bank’s David Bianco also thinks stocks are looking pricey, but doesn't see the S&P 500 reaching 2000 until end 2015.)

Kostin and his crew lay out 15 stocks that offer a 25% forward p/e discount versus the S&P 500 median stock, 60% faster 2015 EPS growth and a higher dividend yield of 90 basis points.  Ten of those 15 have also lagged the S&P 500 in 2014.

Five are consumer discretionary:
  • Ford
  • General Motors GM 
  • Lowe’s LOW 
  • Whirlpool WHR 
  • GameStop GME 
Five are materials companies:
  • Dow Chemical DOW 
  • Freeport-McMoRan Copper & Gold FCX 
  • International Paper IP 
  • Nucor NUE 
  • Avery Dennison AVY 
And rounding up the rest:
  • Principal Financial PFG 
  • Aetna  AET 
  • Eaton ETN 
  • Stanley Black & Decker SWK 
  • Corning GLW 
  • by market cap


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