3 reasons to buy Goldman Sachs now

GS shares have been beaten down by the SEC investigation, giving long-term investors a huge buying opportunity.

By InvestorPlace Apr 26, 2010 7:24AM

By Hillary Kramer, InvestorPlace.com


Although Goldman Sachs (GS) was beaten down recently on news of a civil fraud investigation by the SEC, don’t count this Wall Street giant out. The fact is that the bad press has driven down shares to bargain levels, and my proven three-point stock screening system is clearly indicating that long-term investors could make the buy of a lifetime snatching up GS shares at current valuations.

Consider that Goldman is now trading at 1.3 times book with its current price of around $157. GS should trade at 1.6 times book -- putting shares somewhere in the $210 range. That’s a 34% return for anyone with the guts to buy in right now!

 

Still not convinced that Goldman is a buy? Check out these three reasons that GS stock is likely to surge over the next 12 months:


Reason #1 – Goldman is oversold
GS shares are down over 15% since the SEC investigation was announced on April 16, giving them a -7% return YTD. Stock is well below both its 50-day and 200-day moving averages. Goldman has also underperformed both the S&P 500 and the S&P Financials index. And all this because of fraud allegations that most investors don’t fully understand, and claims that don’t even carry criminal penalties!
 
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Reason # 2 – GS stock fundamentals are strong

Goldman said last week its first-quarter net income nearly doubled to $3.29 billion, bolstered by strength in its trading operations that drove up revenue to a stunning $12.78 billion. The earnings of $5.59 a share blew away the average forecast of $4.01. Those aren’t numbers to sniff at while other financial companies are still weighed down by credit woes.


Reason #3 – GS earnings power is intact
This latest blowout report is no anomaly. Goldman’s Q1 profits were its second-best ever … and No. 1 was just a few months ago when the bank earned a record $4.79 billion! This week’s report marks the fourth straight double-digit earnings surprise for GS stock, with the average earnings beat topping Wall Street estimates by over 40%.
If you want even more reasons to jump in, click here for my top 5 reasons to buy Goldman Sachs GS stock


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