GOLDMAN SACHS: THE S&P WILL END 2012 -4.2% LOWER THAN TODAY
David Kostin, chief U.S. equity strategist at Goldman Sachs has bucked the bullish trend in the first few months of the year after having been bullish for a long time. Kostin vocally called for S&P 1,250 despite the persistent rally in the first 4 month of the year (see here). Kostin now says the S&P is likely to end the year down slightly at 1250 (4.2% lower than today). He broke his reasoning down based on three big trends:
1. Stagnating US economy.
2. Multiples are likely to stagnate
3. Earnings growth is slowing.
Kostin says the S&P is likely to earn $100 this year and that margins are likely to contract. I think his positioning is totally rational given my own outlook for earnings and the very low upside potential and substantial downside risks heading into the latter portion of the year (see here for more on that).
Kostin also outlined Goldman’s hedge fund monitor and the stocks most aggressively accumulated and most owned by hedge funds. Goldman’s hedge fund VIP basket recently added the following names:
Barrick Gold (ABX)
Berkshire (BRK)
Calpine (CPN)
Devon (DVN)
AIG (AIG)
Capital One (COF)
Salesforce (CRM)
Ebay (EBAY)
EMC (EMC)
Ford (F)
Hertz (HTZ)
Rock Tenn (RKT)
Equinix (EQX)
Hess (HES)
Illumina (ILMN)
WellPoint (WLP)
The names most DROPPED by hedge funds are:
IBM (IBM)
J&J (JNJ)
McDonalds (MCD)
Amazon (AMZN)
WalMart (WMT)
Exxon (XOM)
The 5 names most owned by hedge funds are:
Apple (AAPL)
Express Scripts (ESRX)
Google (GOOG)
Microsoft (MSFT)
Qualcomm (QCOM)
You can see the full Kostin interview at CNBC.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
Follow Me:
11 Comments
Barrick Gold ticker is ABX. Also, there are six stocks listed among the “5 most dropped” list…know you throw these posts together quickly so not trying to be a stickler. Helpful post, much appreciated as always.
Jay
Thanks Jay. Fixed. Appreciate people pointing out the errors.
I want to know how he gets a 4.2% figure. Not 4.3%, not 4.5% but exactly 4.2%! Must be one hell of crystal ball to be that precise. Since he was bullish, now bearish we could assume that he might go bullish again and so ignore this one? Given the accuracy of analysts predictions, I might just file this one.
It’s a round number, 1250. It’s a marketing exercise, these numbers are usually ‘made up’, same as probabilities out of no where. At best there is a weak model behind them, but most usually not.
Anyway, maybe he thinks we may see a repeat of 2011? If things are lining up for further decline, even a crash (a decrease of >10% in two session, even a 20% in a trading week), and late year gains, it’s a possibility.
Personally, I don’t like how price action is going on, increasing volatility and rumor mill movements, at this price levels… a crash could be possible, after we get a bit more upside maybe. We will see.
I believe 1250 to 1255 was the rising wedge breakout from last Fall. Ritholz also said it is likely to fall to that level.
Lol, I thought the same – give a range, but 4.2%, really?
CRM , COP, AIG, ILMN – oh, boy. Highly speculative junk and they are buying it because they think they are going into a downturn? Need to load up on Lulu and Fossil then too. I just don’t get it.
I made some good money in CRM on short side, lots of short squeezes in that name, though. People who trade it are obviously hedgies and don’t understand IT. Still it is not the worst offender among the momo stocks.
Thats a preatty big rally into the end of the year
that 0.2% is a killer
When they say that the stocks above were added, does it presume that they are owned long? Or, could stocks like CRM be short positions?
WellPoint was an essential architect of Obamacare. Easy money to be made in WPT up until “elections” and even more if Obama wins.