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Goldman Sachs Group (GS) was one of the hottest stocks in the first quarter among Hedge Funds. However, shares of the investment bank haven’t fared well overall in 2018 with the stock down by over 5 percent on the year, and almost 18 percent off its highs.

The stock’s poor performance in the second quarter may mean that the investors that were piling into the stock in the first-quarter are running for the exits. Although Goldman’s business has seen a boost due to tax-reform, the big growth rate seen in 2018 is expected to decline materially in 2019, while a flattening yield curve may impact growth further.

Piling In

Hedge funds where aggressively adding to their positions in Goldman in the first-quarter. The total number of aggregate 13F shares held by hedge funds increased by over 7 percent to 23.5 million shares. In fact, Goldman’s stock was rated as the second hottest stock in the first-quarter on the Whale Wisdom heat map, just behind Worldpay, Inc. (WP).

(Whale Wisdom)


In total 38 hedge funds started new positions in the stock, while 48 added to their holdings. Meanwhile, 45 funds reduced shares, while 22 exited. However, as aggressive as the hedge funds were adding the stock to their portfolio, large institutions were reducing their stakes. The number of total aggregate 13F shares held among all institutions dropped by about 1.6 percent to 278.8 million shares.

Missing the Rally

Goldman’s stock has missed the entire broader stock market rally in the second quarter, with shares falling by nearly 8 percent, with the S&P 500 rising by over 5 percent. Shares of Goldman, like many of the banks have struggled since reporting results in the middle of April, with one of the biggest headwinds facing the group currently being the flattening yield curve.


Slowing Growth

Another potential headwind facing Goldman, like many of the banks is decelerating growth. Earnings are forecast to grow by nearly 15.9 percent in 2018 and fall to only 6 percent in 2019. Meanwhile, revenue growth is seen slowing from 9.5 percent in 2018, to just 2 percent in 2019.

Even worse, those growth rates are considerably lower than Morgan Stanley (MS) which is forecast to grow earnings by 31.5 percent, and revenue by nearly 13.9 percent in 2018.

Not Cheap

Even with the pullback, the stock is still at a lofty level on a price to tangible book value, at 1.3. In fact, the current valuation places Goldman at the upper end of its historical range over the past five years.

The rush into Goldman’s stock may have simply been a case of buy the rumor and sell the news, while the stock faces an even greater decline should hedge funds be moving out of the stock.

This entry was posted on Monday, June 18th, 2018 at 9:10 am and is filed under 13F, HeatMap, Stock. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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