Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Goldman Sachs is Super Profitable

The Goldman Sachs Group Inc. (NYSE: GS) is super profitable, despite all its controversies and troubles.

For instance, Goldman Sachs reported a quarterly gross profit of $9.141 billion on revenues of $9.955 billion on 31 December 2019. Therefore, Goldman Sachs reported a cost of revenue of $814 million on 31 December 2019.

Moreover, Stockrow estimates Goldman Sachs had a quarterly net profit of 17.32% and a gross margin of 91.82% on 31 December 2019. As a result, Goldman Sachs reported an operating income of $2.231 billion and a common net income of $1.734 billion on 31 December 2019.

The Goldman Sachs Money Machine Marches on

Goldman Sachs (NYSE: GS) generates vast amounts of cash. For instance, Goldman reported a quarterly operating cash flow of $51.351 billion and a quarterly operating cash flow of $39.452 billion on 31 December 2019.

Consequently, Goldman Sachs had $355.308 billion in cash and short-term investments on 31 December 2019. Therefore, Goldman Sachs is cash-rich company.

I think the cash makes Goldman Sachs a value investment at the $150.68 share price reported on 12 March 2020. In addition, Goldman Sachs is a good Environmental, Social, and Governance (ESG) company.

Is Goldman Sachs a Good ESG investment?

Yahoo! estimates Goldman Sachs had an ESG Risk Score of 32 in March 2020. In detail, Yahoo! gave Goldman Sachs an environmental risk score of 0.9%, a social risk score of 14.8%, and an Governance Risk Score of 16.4%. Additionally, Yahoo! gives Goldman Sachs a high controversy level of four.

Thus, Goldman Sachs is theoretically, a good EGS investment. However, Goldman Sachs is a good ESG investment because of its business. To explain, Goldman Sachs does not extract fossil fuels or burn fossil fuels or manufacture chemicals.

However, Goldman Sachs owns shares in companies that manufacture chemicals, extract fossil fuels, and burn fossil fuels. In addition, Goldman Sachs lends money to those companies and issues stock for them.

Thus, Goldman Sachs makes a lot of money from companies with terrible ESG scores. Therefore, I consider Goldman Sachs a questionable ESG investment?

Is Buffett dumping Goldman Sachs?

Importantly, Berkshire Hathaway (NYSE: BRK.B) owns 12 million Goldman Sachs scores.

However, Berkshire sold 35% of its Goldman Sachs stake in the last quarter, Reuters estimates.  Thus, Berkshire Hathaway still holds a major stake in Goldman Sachs.

Buffett has been a major GS investor since 2008 when he injected $5 billion into the investment bank during the Great Financial Crisis, The Motley Fool’s James Brumley estimates.

Thus, Buffett thinks Goldman Sachs is still a value investment. He just considers it less of value than it had been.

Goldman Sachs is a Great Dividend Stock

However, I think Goldman Sachs (NYSE: GS) is still a good stock for ordinary investors because it pays a nice dividend.

For instance, each Goldman Sachs share paid a $1.25 dividend on 28 February 2020. Overall, Goldman Sachs shares offered a dividend yield of 2.491%, an annualized payout of $5, and a payout ratio of 20.59% on 12 March 2020. Impressively, credits Goldman Sachs with eight years of dividend growth.

Thus, Goldman Sachs offers a high margin of safety, which makes it a good stock for ordinary people. If you need income you need to think about buying Goldman Sachs stock.

The Future of Goldman Sachs

I think Goldman Sachs has a bright future because of its embrace of technology. For instance, Goldman launched its Marcus consumer banking App in January.

The app allows Goldman Sachs customers to access their Marcus accounts from any smartphone. Marcus is an artificial intelligence power platform that offers high yield savings accounts, CDS loans, and other products directly to consumers.

Marcus offers no-fee, fixed-rate loans of $3,500 to $40,000 to consumers. Therefore, Goldman Sachs (NYSE: GS) can reach millions of new clients through the Marcus App.

Goldman Sachs is a Good Growth Stock

In particular, Goldman Sachs reaches all the young people who own mobile phones but never go near a brick and mortar bank. Goldman Sachs’ hope is that Marcus will serve as a gateway to its other services, including investments and retirement savings.

Importantly, the Pew Research Center estimates 96% of Americans owned a mobile phone on 7 February 2019. In addition, the Pew Research Center estimated 81% of Americans owned a smartphone in February 2019.

Therefore, 81% of Americans could use Marcus. Hence, Goldman Sachs (NYSE: GS) is a great growth stock. In fact, Stockrow estimates Goldman Sachs had a revenue growth rate of 23.21% on 31 December 2019.

In the final analysis, I consider Goldman Sachs a good all-around stock. If you’re looking for a total package stock that offers dividends, growth, value characteristics, and a high margin of safety, Goldman Sachs could be a good choice.