When reviewing the “Conviction” or “Focus” list group of Buy rated stocks at Wall Street firms you are typically getting a look at their “Cream of the crop”. It’s not unusual for big bulge bracket firms to follow and report on 500 or more stocks, many of them with buy ratings. So when you review their top picks it’s usually presented on a shortened list with anywhere from 25 to 75 names. What can be just as important as the top names is the weighting in the list of the top sectors.
The Goldman Sachs Group, Inc (NYSE: GS) Conviction Buy List Americas has a total of 70 names that make up their top picks. These names are spread over most sectors with two names duplicated to account for multiple exchange listings. We thought it would be interesting to not only find which sectors were most heavily weighted, but what the top picks in each sector were.
1) Technology – 17.14%.The stock they project with the largest potential gain is video game maker Activision Blizzard, Inc. (NASDAQ: ATVI). Trading today at $11.06 their 12 month price target is $16.
2) Consumer Cyclicals - 15.71%. Tumi Holdings Inc. (NASDAQ: TUMI). Tumi Holdings, Inc. designs, produces, and markets travel products, business cases, and accessories. Trading today at $21.23 the 6 month price target is $30.
3) Financial Services – 14.28%. Wisdom Tree Investments, Inc (NASDAQ: WETF) is this sectors top pick. WisdomTree Investments, Inc., through its subsidiaries, operates as an exchange-traded funds (ETFs) sponsor and asset manager. Trading today at $7 the 12 month price target is $9
4) Energy – 11.42%. HollyFrontier Corporation (NYSE: HFC) is the top pick. HollyFrontier Corporation operates as an independent petroleum refiner and marketer in the United States. Trading at $43.40 today the 12 month price target is $69.
5) Healthcare – 11.42%. Volcano Corporation (NASDAQ: VOLC). Volcano Corporation designs, develops, manufactures, and commercializes intravascular ultrasound (IVUS) and fractional flow reserve (FFR) products used in the diagnosis and treatment of vascular and structural heart disease. Trading today at $24.07 the 12 month price target is $32.00.
One of the key rules in investing is diversification. That is where looking at the top pick in the top sectors can be helpful. Not only do you find the individual name that may be poised for the best move you lower your investment risk by spreading capital out over diverse areas of the economy. Generally in a vicious bear market all sectors may go down. But in a sideways to up market there will be market leading sectors. That is where this strategy may pay off the most.