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Goldman Research Where to Invest

Goldman Research Where to Invest

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Published by: marketfolly.com on Oct 12, 2009
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05/30/2013

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Where to Invest Now
Sustainability of rally depends on final demand
September 2009
The Goldman Sachs Group, Inc. does and seeks to do business withcompanies covered in its research reports. As a result, investorsshould be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors shouldconsiderthis report as only a single factor in making their investment decision.For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification, or go towww.gs.com/research/hedge.html.Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
David J. Kostin Chief US Equity Strategist Goldman, Sachs & Co. 212-902-6781 david.kostin@gs.com
 
Goldman Sachs Global ECS Research3
US Portfolio Strategy analytical framework
Economy, earnings, valuation, and money flow
Source: Compustat, Robert Shiller, Federal Reserve, Standard andPoor’s and Goldman Sachs Global ECS Research. Earnings data: Reported(1909-1970) and Operating (1970-2009). As of September 3, 2009.
1. Economy2. Earnings3. Valuation4. Money Flow
 Year-end 2009 S&P 500 Fair Value
Upside / (Downside)Goldman SachsFrom CurrentMethodologyTop-downS&P 500 Level (995)Fed model142043%
US Treasury 10 Year Yield 1580 59BBB Corporate 10 Year Yield 1260 27
Reversion of P/E to 10-yr avg141042%US Portfolio Strategy DDM10607%
Assumptions: 4% ERP, 6.7% long term EPS growth, 4.5% risk free rate 
Avg Fair Value
(using 3 approaches)
1300 31 %
0%20%40%60%80%100%
   1   9   4   6   1   9   4   9   1   9   5   2   1   9   5   5   1   9   5   8   1   9   6   1   1   9   6   4   1   9   6   7   1   9   7   0   1   9   7   3   1   9   7   6   1   9   7   9   1   9   8   2   1   9   8   5   1   9   8   8   1   9   9   1   1   9   9   4   1   9   9   7   2   0   0   0   2   0   0   3   2   0   0   6   2   0   0   9
Hedge Funds 3%Households 35%Other 9%Pension Funds 11%Government Retirement Funds 8%International Investors 12%Mutual Funds 23%
Share of US Corporate Equity Market
 
(0.7)1.5(2.7)(5.4)(6.4)(1.0)3.03.02.02.01.51.5(8.5)%(6.5)%(4.5)%(2.5)%(0.5)%1.5%3.5%
Q1AQ2AQ3AQ4AQ1AQ2EQ3EQ4EQ1EQ2EQ3EQ4E
   G   D   P   G  r  o  w   t   h   (  q  o  q  a  n  n  u  a   l   i  z  e   d   %   )
200820092010
EPS RecoveryPrice RecoveryEPSEPS
One YearTwo YearsOne YearTwo Yea
PeakTrough
After TroughAfter TroughReturnReturn
Dec-09
Dec-14
69%
194 %
29%
33 %
Dec-16
Dec-21
138
238
37
26
Dec-29
Sep-38
31
74
121
113
Sep-41
Jun-46
71
122
54
59
Jun-51
Dec-52
5
16
42
59
Jun-56
Dec-58
18
13
31
44
Dec-59
Sep-61
15
30
33
56
Dec-66
Sep-67
11
20
33
42
Sep-69
Dec-70
17
37
44
60
Sep-74
Sep-75
30
55
38
67
Dec-81
Dec-82
21
43
58
62
Jun-86
Jun-87
41
66
21
57
Jun-89
Mar-92
14
43
29
36
Sep-00
Mar-02
22
49
34
44
Jun-07
Jun-09 
50 
Historical Average36%71%43%54%

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