Goldman: Superhero or ticking time bomb?
Posted
Oct 30 2007, 06:16 PM
by
Matt Koppenheffer
So after he oversaw $8 billion-plus in losses at Merrill Lynch and shopped a merger with Wachovia without consulting his own board, Stan O'Neal is officially out of the CEO spot. At least he'll have plenty of time to tweak his golf game now. Oh no, wipe away those tears -- ol' Stan, he won't be on the ramen noodle diet any time soon.
While the troubles of other struggling firms like Bear Stearns, Citigroup, and Bank of America have faded into the background to some extent as Merrill's shenanigans have taken center stage, they're not gone. Even Merrill, which may elicit the reaction of "how much worse can it really get" might get a bit worse. Deutsche Bank analyst Mike Mayo, who's been really turning the screws on the management teams at the banks, suggests that new management might get even more conservative and write off as much as $4 billion more.
But what of Goldman Sachs? The firm reported truly sweet results just as everyone else was trying to figure out how to best phrase "yes, that's billion with a B." How'd they do it? Well, they shorted the heck out of mortgage positions as the housing and credit markets were falling through the floor. Talk about out-of-the-box thinking…
With Goldman not only back well above its August lows (46% higher actually, but who's counting?) but also hitting new 52-week highs, the question has to be asked whether it is going to be able to completely sidestep the problems that have been clobbering its competitors.
On The Motley Fool's CAPS service, the stock has three stars out of a possible five, suggesting that CAPS members think the stock is a middle-of-the-road idea. Overall, though, there have been 2,414 CAPS players that are bullish on the stock against just 174 that think the stock will underperform the market. One CAPS player that's bullish on Goldman, nycguy, quipped, "These are the smartest guys in the room right now. I want to put my money with smartest people in the room."
Personally, I think Goldman has an army of freakishly smart, mutant traders that have been minting money for the company. Will they continue to hit grand slams? Well, that's part of my problem with the stock -- because the company is so opaque it's really tough to divine that. For those that want a little black magic in their portfolio, though, a trailing P/E of 9.9 gives a fair amount of room for error.
(Full disclosure: I own shares of Bank of America, but do not have a financial position in any of the other companies mentioned.)
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