David Kostin, Chief Equity Strategist at Goldman Sachs is very bullish about 2013. He’s calling for a 10%+ rally in stocks. Kostin had been bearish for much of the latter portion of 2012 with a 1250 price target on the S&P 500. His current call is largely based on valuations which could change rapidly if corporate profits take a turn for the worse (via Business Insider):
“Valuation: 12-month target of 1575 reflects 12% potential return
Our 3-month, 6-month, and 12-month forecasts are 1450, 1500, and 1575. We use six valuation approaches including DDM, uncertainty-based P/E multiple, cyclically-adjusted P/E multiple, price/book and ROE relationship.
Kostin recommends positioning for the multiple expansion using the following strategies:
…Strategies to capture growth: market, sectors, stocks
(1) Stocks will outperform Treasuries;
(2) Equities will beat credit returns, although not on a risk-adjusted basis;
(3) Cyclical sectors will beat defensive sectors (Materials, Industrials, Information Technology will outperform Consumer Staples, Telecom, and Health Care);
(4) Double Sharpe Ratio stocks offer both high risk-adjusted earnings growth and prospective returns; and
(5) Stocks with high BRICs sales exposure will beat domestic-facing firms.”
Source: Goldman Sachs
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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