The Goldman Sachs Group Inc (GS) Gold Rush

But as the economic climate changes, Wells Fargo’s steady revenue stream will stay what it is – steady – whereas rising interest rates, higher spreads, and more activity will significantly boost the earnings and profits of Goldman Sachs. More risk, more reward, of course.

For the risk-takers, Goldman Sachs provides a pretty good shot at generating solid capital gains in the quarters to come. On the flip side, Wells Fargo remains and will continue to be a strong investment.

Neck and Neck

Looking at the valuations of both companies, they’re relatively equal. Goldman Sachs is trading at a price equal to 11 times its earnings, whereas Wells Fargo is trading at 12. But what really emphasizes the two different strategies here is the disparity in their dividend income. Wells Fargo currently yields a 6.8% annual dividend, whereas Goldman Sachs only brings in 0.8%. Huge difference! But I believe Goldman Sachs also pulls in a more reliable opportunity for big capital gains in 2013, so it’s quite the trade-off. The beta ratios of both companies are nearly equal, hovering around 1.4.

With that being said, Wells Fargo doesn’t provide the same correlation with treasury yields that Goldman Sachs offers, so any predictions coming out of my crystal ball are much more opaque. In the pursuit for certainty though, I prefer Goldman Sachs Group Inc (NYSE:GS) as part of a more aggressive capital gains strategy.

This may be your last shot to lock in good dividend with Wells Fargo though, so make a decision, and make it quick!

The article The Goldman Gold Rush originally appeared on Fool.com and is written by Ryan Gilbert.

Ryan Gilbert has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of Wells Fargo. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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