Goldman Sachs Fools Small Investors Again?

Most analysts and investors place stocks into three main categories: Buy, Hold/Neutral and Sell. Goldman Sachs Group Inc (NYSE:GS) has one extra group of elite stock picks which it calls the “Conviction Buy List”. This list, which is updated on a regular basis, contains Buy-rated stocks that Goldman analysts are particularly bullish on. An investor might think that if a stock is on that list then it’s a good investment. So, if these picks are so good, why would Goldman give these tips for free (although the list is available only to customers, many of the picks end up in the press anyway)?

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In the beginning of 2017, Goldman Sachs was bullish on the technology sector and added Alphabet Inc Class A (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN), Paypal Holdings Inc (NASDAQ:PYPL) and Pandora Media Inc (NYSE:P). Alphabet, Amazon and Paypal stocks have performed admirably throughout 2017, while Pandora was a big loser, having ended the year 62% in the red. Still, when combined, these 4 stock picks returned an average of 27%, surpassing the 18% return of S&P 500.

Goldman’s Conviction Buy List is also famous for several blunders, including the addition of Radio Shack in August 2011 when the stock was trading at $14 a share, a level it never surmounted after that, and keeping Apple Inc. (NASDAQ:AAPL) on the list during the 2012-2013 decline and removing it afterwards, only to watch the stock soar.

It has been four months since the report of Goldman’s top picks for 2018 surfaced, so Insider Monkey decided to take a look at some of the names that made their way into the press. Goldman’s top 10 picks lost an average of more than 8% since the publication of the report vs. a loss of 3% for the S&P 500 Index. Insider Monkey’s flagship investment strategy, on the other hand, gained 0.3% since the publication of Goldman’s top stock picks for 2018 (see our flagship strategy’s latest picks here). On the next page you can see names and performances of Goldman Sachs’ top stock picks for 2018: