Goldman Sachs: Can the “Golden Slacks” Image Return After an Awful 2018?
Goldman Sachs Group Inc. (NYSE: GS) has found itself in the midst of international scandal and domestic investigations again, and new CEO David Solomon just doesn’t really seem to want to communicate to the public and investors as much as Lloyd Blankfein did. After a small gain of 6.4% in 2017, Goldman Sachs lost about 34% of its value in 2018. It is supposed to be the top investment bank for the wealthy and institutions, but the firm wants its Marcus online bank and finance play to move to the masses and younger clients.
After closing at $167.05 in 2018, Goldman Sachs shares have a 52-week range of $151.70 to $275.31, and the consensus analyst estimate was still somehow all the way up at $253.30 as 2018 ended. That would imply upside of 51.6% before considering its 1.9% dividend yield. The consensus price target had been up at almost $275 at the start of November, but this seems like yet another situation in which analysts did not lower expectations enough and will need to greatly dial down their price targets and expectations as 2019 gets underway. Goldman Sachs historically traded at a premium to its book value, but it was down at about 0.8 times book value at the end of 2018.
Goldman Sachs may be a great investment bank for the wealthy and for institutions, but expecting a gain of 50% in a single year, with its investigations and international woes being prominent, would imply that everything would have to run super-smoothly ahead at a time when volatility rules.
JPMorgan: Deregulation Booster Turned South
JPMorgan Chase & Co. (NYSE: JPM) blew out expectations in 2017, with shares returning almost 24%, when analysts were originally expecting a −1.1% return. But Jamie Dimon and his team’s share price dropped by 8.7% in 2018.
Shares of JPMorgan closed 2018 at $97.62 apiece. The year-end consensus price target of $120.07 was far higher than the consensus target of $104.23 from a year earlier. And the 3.3% juiced-up dividend yield would imply a total return of 26.3%, if the pool of analysts is proven to be correct.
JPMorgan shares were trading down less than 1% at $97.88 on Thursday. That’s basically flat versus the 2018 close, but a gain up to $120 and change means the bank would have to put in a new all-time high when the economy is slowing and when the yield curve is in a Fed-induced coma.
Travelers: Still the Forgotten Dow Stock
Travelers Companies Inc. (NYSE: TRV) is one that most investors probably never really think of as a Dow stock. It lost 11.7% in 2018, after a gain of 10.8% in 2017. Analysts were only looking for a return of about 2% in 2018, and the weakness in anything tied to the financial sector weighed on the shoulders of Travelers. Investors have to hope a flattening or an inverted yield curve won’t harm insurance companies as much as it could harm the banks.
The insurance and financial giant closed 2018 at $119.75 a share, down from a 52-week high of $150.55. The year-ahead consensus target price of $136.06 was very similar to last year’s target of $135.31. If analysts are correct, the 2.6% yield would help investors get a return of better than 16% in 2019.
This return opportunity of 16% may not seem crazy like some of the others, but with shares down at $116.20 on Thursday, it was already down about $4 per share in less than two full trading days.
Visa: Still Riding Credit Card Transaction Game
Visa Inc. (NYSE: V) doesn’t necessarily care what kind of transaction you make using its credit card because it gets a piece of the action on transaction fees. It just wants more shoppers and buyers using Visa. After a 46% return in 2018 was more than double the expectations in 2017, Visa’s 15.7% price gain in 2018 compared with a total return expectation a year earlier of 9.8%.
At $131.94 in a 52-week range of $111.02 to $151.56, its shares had a year-end consensus target price of $163.56. That would have implied a potential gain of 23.9% for 2019. Visa could stand to do some work on its dividend yield, as it is the weakest of the 30 Dow stocks at just 0.7%.
Visa is one of those financial stocks that has been hard to evaluate. It’s not a bank and doesn’t take risk. It just wants the transaction fees and makes the actual credit card issuers take the transaction risk and worry about whether consumers pay their credit cards timely.