Investing Update: Why I Bought Goldman Sachs
What I'm buying, selling & watching
The retest of the market lows is on. What has been labeled a stock pickers market has been completely brutal. There just seems to be no traction to be had. Both stocks and bonds are down double-digits to start the year. Good earnings from companies are still causing their stock to be sold off. It’s the psychology and reactions that happen during a bear market.
The S&P 500 is down 10.94% YTD.
The Nasdaq is down 18.91% YTD.
If you’ve avoided looking at your retirement accounts, I’d leave it that way. I wouldn’t rush to see how they look today. It’s too late to panic sell now in my opinion. The hardest thing is to stay the course when the market and most stocks are back down to 2020 levels. If you have cash sitting, or money you’ve been waiting to put into the market, these are times to deploy it if you have a long-term time horizon. I’ve done just that as you’ll see below in the moves I’ve made.
Investor Sentiment Hits Lowest Level Since 1992
The Investor Sentiment Survey shows that bullish sentiment has fallen to 15.8% this week. That is the lowest since September of 1992.
Yes, this chart looks very negative. Clearly the bears are in control. But investor sentiment changes in a flash. It’s hard to illustrate the outlook for most. Are people looking at the next week, month, year or multiple years? Are they trading options or buying stocks for the long term? Every investor has a different objective and time horizon. Are you trading or investing? It makes a difference.
If you’re an investor this chart illustrates why that mindset will vary from one to another based on time horizon and what their trading or investing positions are. The market favors the long term investor’s time frame.
A Question Answered
I’d like to get more exposure to dividend paying stocks. What is the best way to go about doing this?
Targeting dividend paying stocks in a high inflation environment is a good strategy. They provide a great hedge against inflation, especially if they continue to grow their dividends. If the company’s stock price increases as well it’s a win-win.
Two ways to go about this would be to target certain companies that have a nice dividend yield. A few examples are;
Chevron (CVX) 3.29%
Home Depot (HD) 2.41%
Johnson & Johnson (JNJ) 2.46%
AbbVie (ABBV) 3.60%
JPMorgan Chase (JPM) 3.04%
Another option is to invest in an ETF that focuses on dividends. Two to consider are the Vanguard Dividend Appreciate ETF (VIG) and Vanguard High Dividend Yield ETF (VYM).
Moves I’ve Made
Goldman Sachs (GS) I’ve wanted to get some banking exposure with this new environment we’re entering. Rates have risen and I expect them to continue rising. I decided to buy Goldman Sachs ahead of their earnings at $319 a share.
It was right near its 52 week low. It’s at 1.1x tangible book value. I believe we will start to see some M&A (mergers and acquisitions) activity. Goldman is the premier investment bank. It seems very cheap and undervalued with a P/E of just over 5. It’s cheap relative to its peers in the banking sector and very cheap versus the S&P 500. The dividend sits at 2.35%. This is the type stock that I see working for the foreseeable future in this environment.
Nvidia (NVDA) I added to my Nvidia position at $201.50. The semiconductors keep getting sold off. Hard to not be excited about the long term outlook on Nvidia. It’s best in show in the semis sector. I will just continue to lower my costs basis in this name.
Peloton (PTON) I double my position in Peloton at $19.95. With the horrific earnings from Netflix, the streaming companies and companies who rely on subscription revenue were down in reaction. I feel the Netflix problems are a Netflix specific problem and not an indication of other streaming or subscriber issues.
What I’m Watching
In my last Investing Update I stated the following;
I’m approaching my setup with the anticipation that we retest those lows on the S&P 500 as well as the Nasdaq. I think that those lows will hold and we’ll bounce and rally upward. I still am not ruling out new all-time highs before the end of the year. Right now that sure isn’t the popular belief. But as we know with the stock market, what the crowd and majority thinks will happen, rarely is what actually happens.
I still feel this way. As the investor sentiment survey above shows, the positive outlook on the market is the lowest since 1992. Is the crowd right or wrong? Right now it looks correct.
Next week is the busiest earnings week of earnings season. Led by Microsoft on Tuesday, Amazon and Apple on Thursday. If they stumble or top earnings and the market doesn’t hold, watch out below. If they breakdown and we fall below towards new lows, it could make for an interesting summer. Where does the support come from and what catalyst turns the market? There is a lot of negativity and bearish signs right now. As we enter earnings season, could strong corporate earnings turn the tide? Apple, Amazon and Microsoft may give us the indicator this coming week. Buckle up!
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion.