Goldman Sachs Value Stocks: Top 5 Stock Picks

In this article, we discuss the top 5 value stocks from the Goldman Sachs portfolio. If you want to see more stocks in this selection, check out Goldman Sachs Value Stocks: Top 10 Stock Picks. 

5. JPMorgan Chase & Co. (NYSE:JPM)

Number of Hedge Fund Holders: 104

Goldman Sachs’ Stake Value: $1,609,282,000

P/E Ratio as of November 10: 10.95

JPMorgan Chase & Co. (NYSE:JPM), the American multinational financial services corporation and investment bank, is one of the top Goldman Sachs value stocks to watch. Goldman Sachs owns 14.3 million shares of JPMorgan Chase & Co. (NYSE:JPM) worth $1.60 billion as of June 2022, representing 0.36% of the total securities. 

On October 17, Citi analyst Keith Horowitz reiterated a Buy recommendation on JPMorgan Chase & Co. (NYSE:JPM) with a $135 price target following the company’s Q3 results. The analyst noted the bank is “hitting on all cylinders” and that present share levels provide an “excellent entry point” for a “quality franchise.”

Among the hedge funds tracked by Insider Monkey, 104 funds were bullish on JPMorgan Chase & Co. (NYSE:JPM) at the end of June 2022, compared to 110 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder of the company, with approximately 8 million shares worth $900 million. 

Here is what Vltava Fund has to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q3 2022 investor letter:

“We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.

JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.

A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.”

4. Ford Motor Company (NYSE:F)

Number of Hedge Fund Holders: 46

Goldman Sachs’ Stake Value: $2,168,347,000

P/E Ratio as of November 10: 5.86

Ford Motor Company (NYSE:F) is a Michigan-based automaker that operates through three segments – Automotive, Mobility, and Ford Credit. Goldman Sachs owns 23.71 million shares of Ford Motor Company (NYSE:F) worth $2.16 billion, representing 0.48% of the total portfolio. 

On October 26, Ford Motor Company (NYSE:F) declared a quarterly dividend of $0.15 per share, in line with previous. The dividend is payable on December 1, to shareholders of record on November 15. The dividend yield on November 10 came in at 4.51%. 

Following what he called a “mostly in-line” quarter from Ford Motor Company (NYSE:F) and fiscal year guidance for $11.5 billion in adjusted EBIT that is about $1 billion ahead of his estimate, Morgan Stanley analyst Adam Jonas said that he views Ford Motor Company (NYSE:F)’s decision to wind up its Argo robotaxi business as “a positive that investors will appreciate over time.” He maintained an Overweight rating and a $14 price target on Ford Motor Company (NYSE:F) shares.

According to Insider Monkey’s data, 46 hedge funds were long Ford Motor Company (NYSE:F) at the end of June 2022, and D E Shaw held a leading position in the company, comprising more than 23 million shares valued at $257.6 million. 

Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), have recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6% from 7.2% in early August and slashing full-year profit growth to 4.5%.”

3. Starwood Property Trust, Inc. (NYSE:STWD)

Number of Hedge Fund Holders: 13

Goldman Sachs’ Stake Value: $2,345,738,000

P/E Ratio as of November 10: 8.39

Starwood Property Trust, Inc. (NYSE:STWD) is a Connecticut-based real estate investment trust with operations in the United States, Europe, and Australia. The REIT has four segments – Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing. It is one of the premier Goldman Sachs value stocks to consider. In Q2 2022, Goldman Sachs owned 23.8 million shares of Starwood Property Trust, Inc. (NYSE:STWD) worth $2.3 billion, representing 0.53% of the total holdings. 

On November 1, BTIG analyst Timothy Hayes maintained a Buy rating on Starwood Property Trust, Inc. (NYSE:STWD) but lowered the price target on the shares to $24 from $29 as he acknowledged there may be somewhat limited support by an 8% dividend yield given the current structure of interest rates. 

According to Insider Monkey’s Q2 data, 13 hedge funds were long Starwood Property Trust, Inc. (NYSE:STWD), compared to 15 funds in the preceding quarter. Amy Minella’s Cardinal Capital held the biggest stake in the company, comprising over 5 million shares worth $104.70 million. 

2. NRG Energy, Inc. (NYSE:NRG)

Number of Hedge Fund Holders: 29

Goldman Sachs’ Stake Value: $3,035,643,000

P/E Ratio as of November 10: 5.41

NRG Energy, Inc. (NYSE:NRG) is a Texas-based integrated power company that generates electricity using natural gas, coal, oil, solar, nuclear, and battery storage. The company serves residential, commercial, industrial, and wholesale customers. It is one of the top Goldman Sachs value stocks to invest in. Goldman Sachs, in the second quarter of 2022, held 28.2 million shares of NRG Energy, Inc. (NYSE:NRG) worth over $3 billion, representing 0.68% of the total portfolio. 

On October 21, NRG Energy, Inc. (NYSE:NRG) declared a $0.35 per share quarterly dividend, in line with previous. The dividend is distributable on November 15, to shareholders of record on November 1. The dividend yield on November 10 came in at 3.28%. 

According to Insider Monkey’s data, 29 hedge funds held stakes worth $1.3 billion in NRG Energy, Inc. (NYSE:NRG) at the end of June 2022, compared to 31 funds in the last quarter worth $1.5 billion. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 16.5 million shares valued at $631 million.

1. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 153

Goldman Sachs’ Stake Value: $4,401,136,000

P/E Ratio as of November 10: 16.74

Alphabet Inc. (NASDAQ:GOOG), the parent company of Google and Google subsidiaries, is one of the top Goldman Sachs value picks. Goldman Sachs owns more than 2 million Alphabet Inc. (NASDAQ:GOOG) shares as of the second quarter of 2022, worth $4.40 billion and representing 0.99% of the total portfolio. 

On October 26, Oppenheimer analyst Jason Helfstein maintained an Outperform rating on Alphabet Inc. (NASDAQ:GOOG) but trimmed the price target on the shares to $135 from $155 to reflect lower 2023 estimates on weaker first half of the year and slower headcount growth. 

Among the hedge funds tracked by Insider Monkey, 153 funds were bullish on Alphabet Inc. (NASDAQ:GOOG) at the end of June 2022, compared to 160 funds in the last quarter. Chris Hohn’s TCI Fund Management held a significant stake in the company, with 2.5 million shares worth $5.4 billion. 

Here is what Mayar Capital has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2022 investor letter:

“In early January this year – which admittedly feels like eons ago – US President Joe Biden was pushing Americans to take up the government’s offer of free COVID tests to help tackle the surging omicron variant. How did Biden respond when citizens asked about the availability of these tests?

“Google it!”

This advice, undoubtedly well-meant, was roundly scoffed at by the press, however. It seemed too obvious to be very helpful.

Anyway, the anecdote serves to introduce you to one of our largest holdings, Alphabet; the parent company of Google. Note that first, Alphabet’s original and core product – its search engine – has entered our common vocabulary as a verb. ‘Googling’ something has the same meaning as ‘researching’ or ‘finding an answer to’ something. Second the reason Biden’s advice was met with such opprobrium was because Googling something has become almost second nature to us now.

These two observations reveal a lot about Google’s strength in the search engine market, in which it has a share of over 90 percent. Because internet search is almost the prototypical network, Google has benefitted from – and we think is also protected by – the huge competitive advantage its scale brings – both to those asking the questions and those providing the answers. The Google search platform becomes increasingly useful to anyone seeking information as a greater volume of stuff becomes available. This starts a virtuous cycle that results in a colossal market share for Google itself. In the language of business strategists, Google benefits from vast network effects.

Because Google’s search results are viewed by billions of eyeballs every day, its search page ‘real estate’ is understandably very valuable to those with goods and services to sell. Advertising revenues from this ‘real estate’ as well as that from its other properties such as Mail, Maps, and so on, totaled almost USD 150b in 2021; amounting to almost 58% of the company’s revenues. Ad sales on YouTube, also owned by Alphabet, brought in another USD 28b. With the secular shift of the advertising spend to digital channels – over which Alphabet has a tight grip – we estimate the company has a share of around 40% of the digital advertising market and is probably the most valuable advertising property in the world…” (Click here to see the full text)

You can also take a look at 12 Best Kid-Friendly Stocks To Buy and 10 Stocks That Will Make You Rich. 

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