It’s always a stock picker’s market. Today, with the market slowing down after a massive rally, that’s more important than ever. And the latest earnings season shows that big banks can be profitable when interest rates rise, but there can be downsides too.
That’s why it’s crucial that investors carefully look for winners that can succeed with today’s high interest rates. And that they’re structured to fare well when interest rates do start to decline later in the year.
While interest rates have been rising, capital markets have started to see more action with the stock market rally over the past 18 months.
That’s allowed investment banks like Goldman Sachs (GS) to report strong financial results.
The financial giant has underperformed the market by about 10 points over the past year.
With its recent numbers showing earnings up 51% in the past 12 months, it’s now trading at about 11 times forward earnings, a steep discount to the overall market.
Action to take: Shares are inexpensive, trending higher, and just pulled back a bit ahead of earnings. Investors may want to buy a partial stake now, and look to use any further market weakness to add to that position.
At current prices, Goldman pays a 2.8% dividend.
For traders, the July $425 calls, last trading for about $10.50, could see mid-double-digit returns in the coming weeks on a further trend higher for shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.