Goldman Sachs isn’t backing down from their very bullish call of S&P 1,300 by mid-year. Their analysts say the Greek debt woes are unlikely to halt the strong global recovery. Specifically, they highlight the continuing low valuations, stronger than expected earnings, robust recovery and positive money flows. Last week’s strong labor report and robust ISM readings were unjustly ignored in their opinion. They expect the robust earnings recovery to continue into the back half of 2010 and still find the market attractive based on valuations:
“Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 44% increase in 2010 to $82, and an 18% increase in 2011 to $97.
Valuation Top-down, the S&P 500 trades at an NTM P/E of 14.0X (13.4X on pre-provision EPS). Bottom-up, it trades at an NTM P/E of 13.3 X and LTM P/B of 2.3X.”
All in all, they see aggressive price gains into the middle of the year with a 1,300 price target (+15%) and 1,250 by the end of the year. They continue to prefer energy, materials, info tech and companies with BRIC revenue exposure.
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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