Which are Buy recommended stocks by Goldman Sachs

Indeed, Goldman says it expects the S&P 500 to rise to 2850 by year end, with the financials and industrial sectors set to outperform the rest of the market. In particular financial stocks should see significant benefit from tax reform, deregulation, capital return and rising interest rates.

As a result, Goldman recommends investors equal-weight tech stocks and overweight these sectors instead. Tech stocks are at risk of unfavorable regulation and won’t benefit as much from tax cuts, so Goldman does not consider them top stocks to buy.

Goldman Sachs is very bullish on one of Warren Buffet’s favorite stocks: Bank of America Corp (NYSE:BAC). In fact, the firm calls BAC one of its top large cap picks from the financial sector. And so far, this seems to be the right call. The bank has just announced fourth-quarter results with impressive EPS of $0.20 (after tax). Five-star Oppenheimer analyst Chris Kotowski describes this as an ‘excellent finish to an excellent year’. He had been anticipating EPS of just $0.13. Now Kotowski expects BAC to hit $37 (20% upside potential). He says: “Our core belief about bank stocks is that what makes them outperform is a rising ROE [return on equity], rather than just a high one, and BAC is providing us an object lesson in that regard.” According to GS, Bank of America looks set to make serious gains from rising interest rates in 2018. This is due to 1) its large book of floating rate loans and 2) its strong deposit franchise. Plus, with excess capital of 9%, Goldman expects the bank to significantly increase its share repurchases and dividend payouts.

Wells Fargo & Company (NYSE:WFC). Wells Fargo is set to get a massive tax break thanks to President Trump. In the fourth quarter alone, this tax cut amounted to over $3 billion! The saving is the result of a reduction in the company’s expected expenses for future taxes. As for Goldman, the firm is clear that WFC should be putting regulatory issues behind it and moving firmly forward. GS also sees share repurchases and rising dividend payouts ahead.

MetLife (MET) - Goldman sees upside of close to 14% for this massive U.S. life insurance company. The bank sees multiple reasons to be bullish on MetLife Inc (NYSE:MET) in 2018. Goldman analyst Alex Scott called the stock his best idea among insurers. Already MetLife is celebrating a legal victory against US regulators who wanted MetLife to be treated as a ‘too big to fail’ company. This would have meant much stricter regulation — but the Trump administration dropped the case on January 19. And as far as Goldman is concerned, MET is on the way to add between 100 and 150 basis points to its return on equity (ROE) by 2020. The firm sees profitability rising on the back of investments in cost saving technology and a less volatile business mix. Plus, Goldman says that as a life insurance company MET looks set to hit the jackpot when the 10-year US treasure note yield rises.

Goldman Sachs has been a big fan of defense stock Northrop Grumman Corporation (NYSE:NOC) for a long time. Back in October, GS highlighted Northrop Grumman as the best-positioned defense company with strong operating results and a raised outlook. And going into 2018, this stock is still one of the firm’s top two defense stocks. The firm says defense stock growth will exceed market expectations in 2018.

Indeed, Goldman is predicting big upside potential for NOC of around 15%. “Defense stocks should outperform again in 2018 as growth continues to exceed expectations,” says Goldman. And as a result, the firm comes out more bullish than consensus in its Northrop 2018 projections. Over the next decade, Goldman forecasts 10% average annual revenue growth for the stock.
And:
L-3 Technologies (LLL)
Deere & Company (DE)
Intercontinental Exchange (ICE)

Source: Bloomberg Pro Terminal

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