Goldman Sachs remains one of the most bullish Wall Street investment banks around on the pace of the economic recovery and the direction of the stock market this year.
And it believes some consumer cyclicals continue to be an untapped opportunity despite the record-setting run the broader market is on.
“Russell 1000 firms with revenues correlated to consumer spending, consensus estimates for sales and earnings in 2021 that exceed 2019 levels, and P/E multiples that do not register as particularly elevated relative to recent history,” Goldman’s chief U.S. equities strategist David Kostin wrote in a new note on Friday.
Several of the standout names from the list (see below) of potential buys include: Whirlpool, Facebook, PPG Industries, Charles Schwab, Raymond James, 3M, Stanley Black & Decker and Discover Financial.
Current trends at consumer cyclicals such as appliance maker Whirlpool underscore Goldman’s call.
“We are optimistic about demand not just in the near- to mid-term, but the longer-term. Some of the drivers we are seeing are the positive growth within housing, not just new home construction but also you are seeing strong existing home sales. Then with consumers continued focus on the home and nesting, what we are seeing is more home renovations where people are investing in their kitchens that they have been spending more time in. We continue to see that trend gaining steam,” Whirlpool CFO Jim Peters told Yahoo Finance Live.
Needless to say, Goldman’s ongoing bullishness on stocks is hardly surprising.
The major equity indices have come out of the gate at a blistering pace amid hopes for a $1.9 trillion stimulus plan from lawmakers and a growing number of people receiving COVID-19 vaccines. Last Friday, the S&P 500 notched its 10th record close of 2021. The Dow Jones Industrial Average had its seventh record of the year, and the Nasdaq Composite its 12th record finish.
On the year, the S&P 500 and Nasdaq have gained 4.8% and 9.4%, respectively.
The one-two punch of rising stock prices, potential for additional fiscal stimulus and a better than expected earnings season has pushed Goldman’s Kostin to lift his earnings expectations for the year.
“We raise our S&P 500 2021 EPS estimate 2% to $181 (from $178), reflecting higher sales and profit margins that should overcome input cost pressures due to high operating leverage. Fiscal stimulus is the next potential upside catalyst for US equities. Payments should support household demand for equities. Many investors believe the spending boost will lead to higher inflation and interest rates, which would reduce the value of equity duration and increase the importance of near-term growth,” Kostin said.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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