Goldman Sachs: "Not Your Typical Bank"

08/12/2020 5:00 am EST

Focus: FINANCIALS

Frank Curzio

Founder and CEO, Curzio Research

The current environment of low interest rates, high volatility and economic uncertainty is perfect for Goldman Sachs (GS), suggests growth stock expert Frank Curzio, editor of Curzio Research Advisory.

Volatility is great for its trading division — and companies need to raise capital and are looking to merge with others, which is great for investment banking.

Goldman Sachs reported second quarter (Q2) earnings on July 15. The investment bank blew past estimates for both earnings per share (EPS) and revenue estimates. For Q2, EPS of $6.26 crushed estimates of $3.91.

Meanwhile, revenue rose an incredible 40.5% year over year (YoY) to $13.29 billion, smashing expectations of $9.76 billion. 

Fixed income, currency and commodities (FICC) reported net revenues of $2.94 billion — the highest in nine years. And investment banking reported record quarterly net revenues of $2.66 billion, with both debt and equity underwriting (helping companies raise money) achieving record results. 

Not all stocks are created equal, and certainly not all banks. Wells Fargo (WFC) reported dismal numbers and many other banking chief executive officers urged caution against assuming the worst is over for banks or the economy.

But GS isn't a typical bank. It doesn't have near the exposure to consumers or the Main Street economy that many others do. The current (although chaotic) economic uncertainty helps GS.

Action to take: We're down about 8% on our 1/2 position. Let's take advantage of this opportunity and add the second 1/2. Buy under $215. Use a 25% hard stop from your cost basis. 

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