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Garp March

Garp March

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Published by: zerohedge on Apr 03, 2010
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April 1, 2010
United States: Portfolio Strategy
US Thematic Views: GARP Update
April ideas and our March report card
April 2010 investment ideas
The Information Technology sector currently offers the best combination ofgrowth and value. The Industrials, Consumer Discretionary, and Financialssectors screen as Unattractive.
Five new sub-sectors offer Growth-at-a-Reasonable-Price (GARP)
Broadcasting, Soft Drinks, Pharmaceuticals, Health Care Equipment, andOffice Electronics entered our GARP screen.
No sub-sectors were removed from our GARP basket2010 Performance of our GARP screen
In March, our GARP screen outperformed the S&P 500 (+6.7% vs. +6.0%).Since inception (January 2004), GARP has outperformed the S&P 500(+29.0% vs. +16.1%, a positive excess return of 1282 bp). Bloomberg<GSSU5> contains real-time pricing and constituents of our baskets.
Our screening methodology
To gauge the performance of our analytical screens, we created four“portfolios” of highlighted sub-sectors and invested an equal dollaramount in each sub-sector. Stock investments within a sub-sector aremade on an equity-capitalization basis. We rebalance the screens at eachmonthly report pricing date to reflect the new constituents. To evaluate theoverall performance of the four investment strategies, we chain-linked theperiod returns to calculate the cumulative total return.
David J. Kostin
(212) 902-6781 david.kostin@gs.com Goldman Sachs & Co.
The Goldman Sachs Group, Inc. does and seeks to do business withcompanies covered in its research reports. As a result, investors shouldbe aware that the firm may have a conflict of interest that could affectthe objectivity of this report. Investors should consider this report asonly a single factor in making their investment decision. For Reg ACcertification, see the end of the text. Other important disclosures followthe Reg AC certification, or go to www.gs.com/research/hedge.html.Analysts employed by non-US affiliates are not registered/qualified asresearch analysts with FINRA in the U.S.
Nicole Fox
(212) 357-1744 nicole.fox@gs.com Goldman Sachs & Co.
Caesar Maasry
(212) 902-9693 caesar.maasry@gs.com Goldman Sachs & Co.
Amanda Sneider
(212) 357-9860 amanda.sneider@gs.com Goldman Sachs & Co.
The Goldman Sachs Group, Inc. Goldman Sachs Global Economics, Commodities and Strategy Research
 
April 1, 2010 United States: Portfolio StrategyGoldman Sachs Global Economics, Commodities and Strategy Research 2
April 2010 GARP Update
Exhibit 1: Information Technology appears to have Growth-at-a-Reasonable-Price (GARP)
as of March 31, 2010
Source: Compustat, First Call, I/B/E/S, IDC and Goldman Sachs Global ECS Research.
Exhibit 2: GARP outperformed in March
Total return, equal weighted, monthly rebalancing, January 23, 2004 – March 31, 2010
Note: The ability to trade this basket will depend upon market conditions, including liquidity and borrow constraints at the time of trade.
Source: Compustat, First Call, I/B/E/S, IDC and Goldman Sachs Global ECS Research.
Consumer DiscretionaryConsumer StaplesEnergyFinancialsHealth CareIndustrialsInformationTechnologyMaterialsTelecom ServicesUtilities
0123456789100 1 2 3 4 5 6 7 8 9 10
   V  a   l  u  e   S  c  o  r  e  r  e   l  a   t   i  v  e   t  o   S   &   P   5   0   0
Growth Score relative to S&P 500
Unattractive
 
GrowthValue
GARP
455565758595105115125135145155
       2       3    -       J      a      n    -       0       4       2       3    -       J     u       l    -       0       4       2       3    -       J      a      n    -       0       5       2       3    -       J     u       l    -       0       5       2       3    -       J      a      n    -       0       6       2       3    -       J     u       l    -       0       6       2       3    -       J      a      n    -       0       7       2       3    -       J     u       l    -       0       7       2       3    -       J      a      n    -       0       8       2       3    -       J     u       l    -       0       8       2       3    -       J      a      n    -       0       9       2       3    -       J     u       l    -       0       9       2       3    -       J      a      n    -       1       0       2       3    -       J     u       l    -       1       0       2       3    -       J      a      n    -       1       1       2       3    -       J     u       l    -       1       1
GS GARPS&P 500S&P 500Equal Weight
GSEqual-WeightGARPS&P 500S&P 500
Inception-to-Date 29.0 16.1 22.9
23-Jan-04 to 31-Mar-10
One-month 6.7 6.0 6.9
26-Feb-10 to 31-Mar-10
 
April 1, 2010 United States: Portfolio StrategyGoldman Sachs Global Economics, Commodities and Strategy Research 3
Exhibit 3: The Bottom Line
Our key forecasts for the S&P 500 index, recommended sector positioning and top thematic trade ideas
(a) Sector weightings last rebalanced on 7-Dec-09. (b) US Portfolio Strategy baskets may be found on Bloomberg by typing <GSSU5>. The Bloomberg pageprovides real-time basket performance and current basket constituents. To obtain access to our baskets on Bloomberg, please contact your Goldman Sachssalesperson.Note: The ability to trade this basket will depend upon market conditions, including liquidity and borrow constraints at the time of trade.
Source: Compustat, First Call, I/B/E/S, IDC and Goldman Sachs Global ECS Research.
Equity Basket disclosure
The Equities Division of the firm has previously introduced the basket of securities discussed in this report. The EquityAnalyst may have been consulted as to the composition of the basket prior to its launch; however, the views expressedin this research and its timing were not shared with the Equities Division. Note: The ability to trade this basket willdepend upon market conditions, including liquidity and borrow constraints at the time of trade.
S&P 500 Index Forecasts
2010 year-end price target
1,250
7% above current price level of 1169
S&P 500 EPS estimates2008A2009E2010E2011E
GS Portfolio Strategy top-down
$50 $57 $76 $90
Growth (% year/year)
(40)15332
Recommended Sector Positioning
RecommendedGS Overweight / S&P 500Total ReturnGS AlphaS&P 500 SectorPositioningUnderweight (a)Weight2010YTD
Information Technology
300 bp 19% 2% (10)bp
Energy
300 11 1 (13)
Materials
200 3 3 (4)
Consumer Staples
0 11 6 0
Industrials
0 11 13 0
Financials
0 16 11 0
Telecom Services
(100) 3% (4) 9
Consumer Discretionary
(200) 10 10 (10)
Utilities
(200) 3 (4) 17
Health Care
(300) 12 3 6S&P 5000 bp 100% 5% (5)bp
Thematic Trade Recommendations
InitiationOur best trade ideas: Portfolio Strategy thematic baskets (b)DateReturn
BUY High Sharpe Ratio Basket (GSTHSHRP); SELL S&P 500
See 2010 Outlook: Cyclical start; defensive finish (7-Dec-09).
8-Dec-09 3.0 %
BUY High Operating Leverage (GSTHOPHI); SELL Low Operating Leverage (GSTHOPLO)
See Macro to Micro Shift Part II: 2H 2009 Update (20-Jul-09).
20-Jul-09 9.4 %
BUY BRICs Sales Basket (GSTHBRIC); SELL S&P 500
See Portfolio Passport: Coming to America (5-Nov-08).
4-May-09 13.5 %
OverweightNeutralUnderweight

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