Yesterday, I decided that it was time to begin rebuilding my Goldman Sachs (GS) position.
Last year, I had sold my position when the financial stocks began taking a hit due the subprime mortgage crisis.
I feel that much of the problems are now priced into the financials and now may be a good time to begin getting back in. I would suggest starting with a small position in the best run, strongest financials.
Goldman Sachs is one of the leading firms that has weathered the past year’s problems very well. I feel quite confident in their abilities in the long term and based on my analysis the stock appears to be a very good value at the current price. I figure the company to be worth about $237/share.
Next, I initiated my position in HP (HPQ). This is a company that I’ve wanted to own for some time now.
Over the years I’ve been in business much of my technology purchases have been HP products. I have purchased (2) HP Desktops, (3) Compaq Laptops, (3) HP Printers, and a HP Business Calculator. The products have generally performed quite well for me over the years and the service has been great.
When I damaged my laptops in the past, the support would be so fast to get it repaired. I would make a phone call, DHL would be at my door the next day to pick it up in a special laptop box. Then, within 2-3 days later, the laptop would appear again at my door all fixed and most of the time the repairs were covered under the extended warranty I purchased, which was usually a great deal. I valued this service very much and it’s why I continued to be loyal.
I’ve also always thought that their products have been the best value in terms of features for price. Whenever I’m looking for a new computer or printer, I usually review all the different brands and I end up choosing the HP product as their product usually provides me the features I need at the lowest cost.
Now is a good time to get in. The stock has pulled back some with the general market problems. The company is strong and getting stronger as it continues to gain market share in the US and abroad. They are becoming a complete one-stop shop for all your IT needs, especially with their merger with EDS. The new management has been great cost reduction and should be able to do same with EDS. HP also should trend higher in the short term as it should see a spike in back to school sales.
The current price is slightly overvalued based purely on intrinsic value, but slightly undervalued compared to competitors such as Dell (DELL), so I’m starting with a small position and I’m prepared to buy more if the price dips further. However, the premium may be warranted if it can continue to increase growth in income at better than expected rates.
Full Disclosure: I own shares of Goldman Sachs and HP.
Over the last couple months I have spent a lot of time monitoring and adjusting our investments as the market has been so volatile and uncertain.
I trimmed back on anything financial or related to financial. For example I sold positions in Goldman Sachs, Morgan Stanley and Discover. I also reduced or sold some positions that have appreciated a lot and where the companies are really over-valued at this time, over-valued stocks are most likely to be knocked down. If this happens with some stocks we hold, I will most likely be a buyer again once they are at under-valued price.
I would suggest now is a good time to be more defensive. Stocks like Berskhire Hathaway, Pepsi, Johnson and Johnson, Proctor and Gamble, etc. are good and safe investments right now. Silver is also a good bet with the rapidly declining dollar over the last few months.
Full Disclosure: I own shares of Pepsi, Berkshire Hathaway and I hold investments in bullion silver.
Goldman Sachs (GS) has created their own private trading system called Goldman Sachs Tradable Unregistered Equity system or GSTRuE to compete with the pubic trading system. This will provide a great alternative for companies who want to raise capital but don’t want the regulatory and disclosure requirements that come with a public listing.
NEW YORK (Reuters) – Top IPO underwriter Goldman Sachs Group Inc. (NYSE:GS – News) this week launched a platform allowing an exclusive club of big investors to trade unregistered, privately placed securities, in the latest challenge to U.S. equity markets.
Last year, according to Nasdaq, $162 billion of capital was raised through unregistered private placements compared with $154 billion through IPOs, which are registered with the Securities and Exchange Commission.
This should be a great opportunity for Goldman Sachs.
However, under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified institutional buyers, investors with at least $100 million of assets, and there are no more than 499 stockholders. So this means that the individual investor has no chance of direct participation.
This is most likely due to the public system being afraid of losing all their business to a better private solution… much like how the USPS won’t allow Fedex or UPS to deliver first class mail.
However, you may of course benefit from the system by owning Goldman Sachs shares and I’m sure there will be publically traded entities or ETFs that will trade in securities within the private system.
Full Disclosure: I own shares of Goldman Sachs and I am considering adding to my position.