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Goldman Sachs’ top stock picks for next year 

Goldman Sachs’ top stock picks for next year

The Goldman Sachs Group, Inc. has been categorised as one of the biggest investment management firm in the world. It is one of the oldest banks around as the company has its roots back to 19th century. Institution’s operations have seen many ups and downs since the inception year and it has stood strong across environments. The bank still continues to manage money for its clients for around 2 centuries since its foundation. Therefore, investors keep track of Goldman Sachs’ top stock picks as they believe that the company’s analysts have done rigorous research before recommending a particular scrip. 

However, these days, the bank has been involved in a bit of turmoil. This is because its plans to focus on consumer banking indeed ended up being disastrous. Because of this the bank took million dollars’ worth of hit to the income statement. 1Q23 earnings report exhibited that it took $470 million loss in its loan portfolio. This was in a bid to reorganize the retail banking division. The said quarter was tough for the banking giant and for overall banking industry as a whole. This was because numerous banks collapsed in the US which led to worries regarding stability of overall banking system. During these tough times, investors focus on the Goldman Sachs’ top stock picks for next year which should help in balancing their portfolio. 

Most recently, in its 3Q earnings call, the company announced the sale of GreenSky. Apart from that, it announced the sale of Personal Financial Management recently. It significantly sold all of its markets loan portfolio, apart from reducing its historical principal investments by around $9 billion this year. The bank expects that such initiatives are expected to provide solid platform for 2024 and beyond.  Apart from this, the US economy proved to be more resilient than the previous expectations, though there are reasons to be vigilant.  

With this in mind, let us now have a look at the Goldman Sachs’ top stock picks for next year. 

1. NRG Energy, Inc.

The company has been categorised as one of the largest retail energy providers in the US, with ~7 million customers, including 2021 acquisition of Direct Energy.

It has released its 3Q performance with GAAP net income coming at $343 million and adjusted EBITDA of $973 million. This led to increase in mid-point of 2023 adjusted EBITDA guidance by $95 million. Results of the company validated ability of NRG’s consumer strategy to generate strong cash flows and healthy long-term shareholder value. 

The company is well-placed to end the year in a strong momentum and enter 2024 with stable momentum. It has line of sight to achieve its 2025 growth targets and believe that its continued focus on emerging demand-side management opportunity should support additional value to consumers along with shareholders.

Its 3Q and YTD adjusted EBITDA saw a significant increase year-over-year as it realized strong consolidated financial and operational performance. 

As a result of its strong financial performance, the company executed on its debt reduction and share repurchase programs on accelerated basis. Through October 31, 2023, it was able to reduce its debt by $800 million and the company repurchased $200 million of common stock. After closing of its STP transaction, the company focuses on executing $600 million of debt reduction 2023 end and initiate $950 million accelerated share repurchase program. 

2. Eli Lilly and Company

The company discovers, develops, and markets human pharmaceuticals worldwide.

Its revenue in 3Q23 saw an increase of ~37% as a result of its growth from Mounjaro, Verzenio and Jardiance, and $1.42 billion from sale of rights for olanzapine portfolio (Zyprexa). If we exclude revenue from olanzapine portfolio and COVID-19 antibodies, the company’s revenue saw an increase of 24%.

Business development activity of the company included successful acquisitions of DICE Therapeutics, Inc., Versanis Bio, Inc., Emergence Therapeutics AG and Sigilon Therapeutics, Inc., and announcement regarding the acquisition of POINT Biopharma Global Inc. New products made the contribution of $1.44 billion to revenue in 3Q23, which was led by Mounjaro. Growth products revenue saw an increase of 12% to $4.96 billion in 3Q23, which was led by Verzenio and Jardiance.

The company saw 3Q23 EPS loss of $0.06 on reported basis and income of $0.10 on non-GAAP basis. Both these figures included an increase of $1.22 of EPS which was related with sale of rights for olanzapine portfolio, and a decline of $3.29 from acquired IPR&D charges. 

3. JP Morgan Chase & Co.

The company has been categorised as one of the largest and most complex financial institutions in the US. It carries out its operations in 4 major segments: 1) Consumer and community banking, 2) Corporate and investment banking, 3) Commercial banking, and 4) Asset and wealth management.

In 3Q23 results, the company saw reported revenue of $39.9 billion and managed revenue of $40.7 billion, consisting $669 million of net investment securities losses. Credit costs of $1.4 billion also included $1.5 billion of net charge-offs along with $113 million of net reserve release. 

The company solid quarter of strong results, in which it generated net income of $13.2 billion and ROTCE of ~22%. However, these results were supported from the over-earning on both net interest income and below normal credit costs, and these should normalise over time. CET1 capital ratio of the banking giant went up further to 14.3%.

The bank’s lines of business saw continued momentum in 3Q, exhibiting its years of investment and value of its consistency and strong principles. 

Conclusion

The above are some of Goldman Sachs’ top stock picks for next year which trade at reasonable levels, considering their levels of P/Es. Apart from these stock picks, Microsoft Corporation, Apple Inc., and NVIDIA Corporation are some of the stock picks recommended by the Goldman Sachs. 

Investors are required to consider Goldman Sachs’ top stock picks for next year as there are number of sectors in the overall US economy which are yet to absorb impact of increased rates, mainly in the environment of tightening of financial conditions.

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I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as Investing.com, Stockhouse.com, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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