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January 8, 2010 United States: Portfolio Strategy: US Weekly KickstartGoldman Sachs Global Economics, Commodities and Strategy Research 3
The charts we are watching: S&P 500 valuation and the BRICs Sales basket <GSTHBRIC>
Exhibit 1:
GSTHBRIC has posted higher sales growth than S&P 500
as of January 7, 2010
Exhibit 2:
GSTHBRIC vs. S&P 500 (+61% vs. +26% in 2009)
as of January 7, 2010
(15)%(10)%(5)%0%5%10%15%20%25%
M a r - 0 7 J u n - 0 7 S e p - 0 7 D e c - 0 7 M a r - 0 8 J u n - 0 8 S e p - 0 8 D e c - 0 8 M a r - 0 9 J u n - 0 9 S e p - 0 9 D e c - 0 9 M a r - 1 0 J u n - 1 0 S e p - 1 0 D e c - 1 0
S a l e s G r o w t h ( y o y % )
Median Sales Growth
GSTHBRICS&P 500
ConsensusForecasts
859095100105110115120125130135140
N o v - 0 8 D e c - 0 8 J a n - 0 9 F e b - 0 9 M a r - 0 9 A p r - 0 9 M a y - 0 9 J u n - 0 9 J u l - 0 9 A u g - 0 9 S e p - 0 9 O c t - 0 9 N o v - 0 9 D e c - 0 9 J a n - 1 0 F e b - 1 0
Relative Performance
Long GSTHBRIC /Short S&P 500
Source: Compustat, I/B/E/S and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 3:
We expect P/Es to expand for 10 months and then remainrelatively flat;
as of January 7, 2010
Exhibit 4:
S&P 500 price level sensitivity to forward EPS and P/E
as of January 7, 2010
891011121314151617(12)(10)(8)(6)(4)(2)0246810121416182022Months from S&P 500 Trough
P / E M u l t i p l e
8090100110120130140150160
Current Cycle
(2009, LHS)
Flat multiple subsequent 12 mo(median change = -2%)
P/E
Average Historical Recovery(1980-2002, RHS indexed)
10 months of multiple expansion(Median expansion = 34%)(Current expansion = 31%)
Currenttop-downP/E
13.7x10.5x13.7x
TargetYear-end 2010P/E
SPXTrough15.0x
Potential2010Peak P/E
S&P 500 Price Level
S&P 500 NTM EPS (pre-P&W)$76$81$86$91$96$10113.3x
101110771144121012771343
13.5
102610941161122912961364
13.7
104111101178124713151384
13.9
105611261195126513341404
14.1
107211421213128313541424
14.3
108711581230130113731444
14.5
110211751247132013921465
14.7
111711911264133814111485
14.9
113212071281135614301505
15.1
114812231299137414501525
15.3
116312391316139214691545
15.5
117812561333141114881566
15.7
119312721350142915071586
N T M P / E
Source: FactSet and Goldman Sachs Global ECS Research. Source: Goldman Sachs Global ECS Research.
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