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Goldman Sachs says these 15 stocks are poised to explode higher as the economy thrives, based on an exclusive metric it developed


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Goldman Sachs says it’s found a way to target the S&P 500 stocks that will benefit the most from continued and sustained economic growth.
That framing fits with the firm’s view that the economy is going to improve this year, meaning those companies are very strongly positioned.
To find those promising companies, Goldman created a measurement called the growth investment ratio, which compares each company’s capital and R&D spending to its cash from operations.
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Everyone talks about investing for the long term, but how can that be measured? Which companies stand apart from the rest in planning for the future?

Goldman Sachs says it’s developed a method to answer those questions, and calls it the growth investment ratio. It’s based on the idea that the companies most aggressive about investing in their businesses will be best-positioned to take advantage of future economic growth.

“We calculate a firm’s growth investment ratio as its total capital expenditures less depreciation (“growth capex”), plus R&D as a share of its cash flow from operations,” wrote David Kostin, the firm’s chief US equity strategist.

The ratio is based on the company’s spending over the past three years. Kostin estimates that over that three-year period, the median S&P 500 has invested just 10% of its cash this way. But a few companies are making much bigger bets on growth.

Goldman’s recommendations come at a crucial time, as investors look to overcome their most severe concerns about the trade war and its effect on economic growth. The firm’s house view is that US growth will accelerate in 2020, compared to last year.

Below are the 15 stocks with the highest growth investment ratio, meaning that economic recovery could help them the most. Each company has a figure above 100%, meaning its capital spending and R&D is greater than its cash flow from operations.

The stocks are ranked from the lowest ratio to the highest.

SEE ALSO: A strategy chief at $7 trillion BlackRock reveals the 4 trends that will shape how the world invests for the next 10 years — and why the trade war won’t scare her away from China

15. Bristol-Myers Squibb

Ticker: BMY

Sector: Healthcare

Market Cap: $153 billion

Growth investment ratio: 103%

Source: Goldman Sachs

14. Deere

Ticker: DE

Sector: Industrials

Market Cap: $55.1 billion

Growth investment ratio: 110%

Source: Goldman Sachs

13. Eli Lilly

Ticker: LLY

Sector: Healthcare

Market Cap: $132.1 billion

Growth investment ratio: 110%

Source: Goldman Sachs

12. NiSouce

Ticker: NI

Sector: Utilities

Market Cap: $10.4 billion

Growth investment ratio: 120%

Source: Goldman Sachs

11. Mattel

Ticker: MAT

Sector: Consumer discretionary

Market Cap: $4.9 billion

Growth investment ratio: 123%

Source: Goldman Sachs

10. Cadence Design Systems

Ticker: CDNS

Sector: Information technology

Market Cap: $20.5 billion

Growth investment ratio: 130%

Source: Goldman Sachs

9. Vertex Pharmaceuticals

Ticker: VRTX

Sector: Healthcare

Market Cap: $58.9 billion

Growth investment ratio: 132%

Source: Goldman Sachs

8. Alliant Energy

Ticker: LNT

Sector: Energy

Market Cap: $13.2 billion

Growth investment ratio: 137%

Source: Goldman Sachs

7. Regeneron Pharmaceuticals

Ticker: REGN

Sector: Healthcare

Market Cap: $41.5 billion

Growth investment ratio:140%

Source: Goldman Sachs

6. Synopsys

Ticker: SNPS

Sector: Information technology

Market Cap: $22.3 billion

Growth investment ratio: 152%

Source: Goldman Sachs

5. Diamondback Energy

Ticker: FANG

Sector: Energy

Market Cap: $14.8 billion

Growth investment ratio: 178%

Source: Goldman Sachs

4. Autodesk

Ticker: ADSK

Sector: Information …read more

Source:: Business Insider

      

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