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Goldman Sachs: Fine Addition
to Most Portfolios, A Decent, Well-Covered Dividend is Another Plus

Ian Gendler, ValueLine, recommends that investors take a look at Goldman Sachs (GS). “It is a global investment bank and securities outfit with more than $1 trillion in assets under management. The company has about 36,000 employees and a market capitalization that exceeds $85 billion. It has been a component of the Dow Jones Industrial Average since 2013.

Shares of Goldman Sachs declined in price during the first half of 2018, but have staged a modest recovery of late. This was largely due to strong second-quarter financial results, as well as the expectation that higher lending rates will boost the bank's earnings power. Revenues of $13.3 billion were considerably higher than consensus analyst estimates, and compared favorably to the year-earlier tally of $10.3 billion. Meanwhile, Goldman achieved share net of $5.98, 51% higher year over year. It's expected that the transition to a new CEO will go smoothly.

We have raised our revenues and earnings estimates for 2018 and 2019. Previously, we expected revenues of $48 billion this year, but we have boosted our call to $53 billion. Our estimate for next year has also been elevated by $5 billion, to $54 billion. As for the bottom line, our per-share expectations now reside at $25.00 and $27.00, respectively, compared to our previous estimates of $24.00 and $26.00. Our improved outlook is partially based on last year's passage of the Tax Cuts and Jobs Act. Goldman's tax rate is now meaningfully lower but, even more important, we think that reduced tax obligations will spur additional mergers & acquisitions in the corporate arena. Brokering and advising on such deals is an area where Goldman specializes.

As for the equity, we think it would make a fine addition to most equity portfolios. Although it has recovered some lost ground of late, the stock price is still off 5%, year to date, compared to the Dow's gain of almost 15%. This underperformance, coupled with Goldman's strong business prospects, provides a good entry point for near- and long-term investors. A decent, well-covered dividend is another plus.”

Editor’s Note: Ian Gendler, is Executive Director, Value Line Research, 551 Fifth Ave., FL 3, New York, NY 10176. Insight from Market Focus, Value Line’s open-access newsletter providing unbiased insights on investments, the markets and the global economy,

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