Jim Cramer Says You Should Buy These 5 Stocks

2. The Goldman Sachs Group, Inc. (NYSE:GS)

Number of Hedge Fund Holders: 75    

The Goldman Sachs Group, Inc. (NYSE:GS) provides a range of financial services. The former hedge fund manager gave the company a Buy rating during the Discussed Stock segment of his show on May 2, according to the Mad Money Stock Screener. As inflation rises and interest rates rise, Cramer has been urging viewers to buy up stakes in financial services firms that are likely to see earnings multiply overnight due to rising rates. 

On April 18, BMO Capital analyst James Fotheringham kept an Outperform rating on The Goldman Sachs Group, Inc. (NYSE:GS) stock with a price target of $486, appreciating the ongoing capital and funding optimization by the firm to improve profitability. 

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Eagle Capital Management is a leading shareholder in The Goldman Sachs Group, Inc. (NYSE:GS) with 3.5 million shares worth more than $1.3 billion. 

In its Q4 2021 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and The Goldman Sachs Group, Inc. (NYSE:GS) was one of them. Here is what the fund said:

“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.

This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. The Goldman Sachs Group, Inc. (NYSE:GS) jumped +47.59% for the year and +1.73% in the quarter.”