Goldman Does it Again

6/18 - "Unlike widget makers or commodity stocks, there is very little analysis I can do with an investment bank - they are opaque black boxes with moving parts we will never know about. But in Goldman we trust, one way or the other they always find a way to profit. Best of breed in a very lousy neighborhood. 10% year over year profit drop is nothing compared to peers in the financial world - heck that would be considered "high growth" to most."

"The company reported a profit of $2.05 billion, or $4.58 per share, for the three months ended May 30 compared to $2.29 billion, or $4.93 per share a year earlier. Revenue fell 7 percent to $9.42 billion from $10.18 billion a year earlier. The latest results easily surpassed Wall Street expectations for a profit of $3.42 per share on $8.74 billion of revenue"

"Rumors that the firm was preparing big writedowns to leveraged loans hit the stock last week, but the losses did not materialize. Reports did surface on Tuesday that the firm is close to bailing out a $7 billion structured investment vehicle, or SIV, which may have weighed on the stock."

"Richard Bove, analyst at Ladenburg Thalmann, said earlier today on CNBC that Goldman "may be the only firm in the world that really understands risk." Explaining his statement to TheStreet.com, Bove said Goldman spends more on its computer systems, has more historical data and dedicates more resources to the task of creating and analyzing computer models that assess risk. "They've got more IT people than they do traders," he said. (risk - what a concept; it's been long lost in the greed of the US financial system)"

6/17 - "Granted Goldman's Price to Book ratio has been notoriously higher than its peers at around 1.9, but that doesn't make it expensive. The industry, through this downtrend and the losses is in a time of consolidation and new metrics. In fact, Goldman, on Price to Book is inching closer to the sector near the high 1.7s. Since P/E ratios don't mean much if they're negative, for some other Investment firms, analysts need new ways of valuation. But GS, has always been on a profitable path, and its trailing P/E now stands at 8! In a perfect world this ratio would be at 12 and it's forward number about the same.

An opportunity exists over the next year or so, to truly make a splash with Goldman Sachs! The cream rises to the top as they say, and a year from now, when GS is looking at trailing earnings once again getting $20/share with a trailing multiple near 12, shareholders getting in the company at this $170-$180 stage will inevitably be 30 to 40% to the good.

6/18 - "Goldman Sachs reported 2Q08 EPS of $4.58, beating our $3.44 estimate and the consensus of $3.42. The relative outperformance was driven by revenue strength (particularly in Investment Banking and Principal Investments) coupled with a lower than expected tax rate and non-compensation expenses."

"Management's tone remained cautious on the near-term operating environment. CFO David Viniar referenced a "challenging" current operating environment multiple times during the call. Actions like boosting the liquidity reserve, scaling back buybacks, and reducing leverage suggest that GS is preparing for a more sustained difficult revenue environment."

"Management joined the industry trend of deleveraging the balance sheet. Gross assets declined by 8% sequentially, bringing gross and net leverage ratios down from 29x and 19x to 24x and 15x, respectively."

"We are increasing our 2008 and 2009 EPS estimates from $16.30 and $21.44 to $17.96 and $22.15, respectively...We are maintaining our HOLD rating. We continue to view GS as best in class, but we find it hard to get too excited about the stock in the face of cyclical revenue headwinds and our expectation for YOY EPS contraction through the balance of 2008."