Goldman Sachs (GS) is getting the attention it deserves on Wednesday in the eyes of those that touted the stock as a top pick for 2019.
Shares of the New York banking behemoth rose more than 10% at their highs, bolstered by an earnings beat and management commentary that has kept the market buying big in the stock.
"We continue to see a business that has steadily grown its tangible book value while RoTCE has increased to multi-year highs," the Action Alerts PLUS team wrote in its earnings report on its biggest bank holding. "It is refreshing to see a dirt cheap and hated stock like Goldman get more respect today in reaction to the print."
The team highlighted the fact that the stock was being punished too heavily for its connection to the Malaysian sovereign wealth fund scandal.
Management certainly seemed cognizant of the market's skittishness on the scandal, as CEO David Solomon broke with Goldman tradition and joined the analyst conference call to give a long explanation on the subject, even naming names of those guilty of malpractice at his firm.
"It's very clear that the people of Malaysia were defrauded by many individuals including the highest members of the prior government. Tim Leissner was a partner at our firm by his own admission was one of those people," Solomon admitted. "As you would expect we have looked back and continue to look back to see if there is anything that we as a firm could have done better."
He also highlighted the role played by 1MDB advisor and current fugitive Jho Low and looked to calm market nerves on litigation risk and due diligence practices at the bank.
"I want you to know before each transaction considerable due diligence was conducted. When control functions in the firm asked if each transaction whether intermediaries were involved they were told no. Tim Leissner himself said no intermediaries were involved in the transaction," he explained. "As detailed in the government's charging documents, Leissner purposely concealed from the firm his scheme with Malaysian government officials at 1MDB."
The rapid rise in the stock has also very quickly vindicated Real Money Pro's Doug Kass' designation of Goldman as his "favorite large cap stock of 2019."
"I value Goldman Sachs at about $245 a share; barring a going private transaction this is a reasonable two-year price target providing a compounded annual rate of return in excess of 20% a year," he commented when bestowing the status in late 2018. "Warren Buffett has taught us the value of being greedy when others are fearful."
For more on the bank earnings and other stock's that investors can be greedy on amidst some skittishness, Jim Cramer and the Action Alerts PLUS team will be providing their picks on Thursday at 11:30 a.m.
Goldman Sachs is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GS? Learn more now.
