Banking & Finance

Goldman Sachs Is Bullish on These Capital Markets Stocks as Trading Volume Soars

You knew it was bound to happen. Once online trading companies started to lower or eliminate commissions, the retail trading public would become more active, and that is an understatement. Combine that with the 35% decline in the stock market in a month, back in February and March, and many people that never invested themselves are now in the game.

Recently a spokesperson for San Francisco-based Charles Schwab said the brokerage is seeing “strong, above-average asset and account growth.” It should be noted that Schwab is still completing last year’s $26 billion all-stock purchase of TD Ameritrade.

A new Goldman Sachs research report also notes some very strong momentum with capital markets stocks, and the firm raised its price targets on some of the highest-ranked of those companies in the Goldman Sachs research coverage. These include not only brokerage firms but also the top exchanges and private equity as well.

Carlyle

This limited partnership is a solid holding for investors looking for private equity exposure. Carlyle Group L.P. (NYSE: CG) is a leading global alternative asset manager, providing investment management services across four operating segments, including Corporate Private Equity, Global Market Strategies, Real Assets and Fund of Funds Solutions. Carlyle has offices worldwide and is headquartered in Washington, D.C.

Last week, Carlyle reported that distributable earnings (the cash available for paying dividends to shareholders) rose to $175 million from $100.8 million a year earlier. This resulted in distributable earnings per share of $0.48, which surpassed the average analyst forecast of $0.40, according to data from Refinitiv.

The analysts noted this when discussing the earnings release:

Taking a step back, CG is facing a relatively more challenging near-term earnings growth backdrop given a relatively higher percentage of earnings dependent on incentive fees and a more challenging fee related earnings growth outlook over the next 12 months. That said, we think valuation provides some support, with the stock trading at 17x 2021 price to earnings and ~17.5x 2021 after-tax fee related earnings.

Shareholders receive a substantial 5.59% dividend. Goldman Sachs lowered its price target on the shares to $26 from $28. The consensus target across Wall Street was last seen at $26.54. The final Carlyle stock trade on Friday came in at $22.18, after falling over 5% on the day.

Intercontinental Exchange

This company resides on the Goldman Sachs Americas Conviction List of top stocks to buy. Intercontinental Exchange Inc. (NYSE: ICE) was founded in 2000 as an over the counter (OTC) energy market and has since expanded both organically and through acquisitions. The firm offers central clearing services for the futures and OTC markets. Its primary products include agriculture, financial and energy contracts and credit default swaps.

The company recently completed a transformational acquisition of NYSE Euronext that greatly diversifies the company while offering significant optionality.