This article is an excerpt from Barronâ€™s 10 favorite stocks for 2021. To see the full list, click here. Â
Goldman Sachs doesnâ€™t get much credit from investors for its blockbuster earnings in the past two quarters, rising returns, and ongoing transformation under CEO David Solomon.
The shares (ticker: GS) trade cheaply at just 1.1 times tangible book value of $215 a share and for about 10 times projected 2021 earnings. Industry leader JPMorgan Chase (JPM) fetches 1.9 times tangible book and 13 times forward earnings.
Rising book value should put a floor underneath Goldman stock. Given the past two blowout quarters, itâ€™s a reasonable bet that the companyâ€™s 2021 earnings will top the current consensus of $23 a share. Goldmanâ€™s shares could approach $300 next year as a result.
Goldman Sachs Group / GS
Goldman and other big banks got some good news late Friday, when the Federal Reserve allowed them to restart share repurchases in the first quarterâ€”earlier than many analysts and investors anticipated. Bank stocks rose in after-hours trading, with Goldman up about 5%, to $254.
The Wall Street bankâ€™s traditional strengths in trading and investment banking helped produce a record third quarter, earnings $9.68 a share. Unlike arch rival Morgan Stanley, Goldman has been focused on building, rather than buyingâ€”Morgan Stanley purchased E*Trade Financial earlier this year and has a deal for asset manager Eaton Vance (EV).
Goldman has created an impressive online consumer banking platform under the Marcus banner with nearly $100 billion in deposits and a credit-card relationship with Apple.
Goldman is seeking to boost more-durable revenue streams and garner a higher valuation on its stock. Evercore ISI analyst Glenn Schorr is looking for a strong fourth quarter.
Write to Andrew Bary at firstname.lastname@example.org