To The Moon

This will be my 9th post to Tiger_chat 's question of whether an investor profits from a good company or a good price ?

To that I have asked, "why not both" ?

Wouldn't that have more upside comparatively speaking ?

I am especially keen to dive into this bank because of its less than stellar quarterly report.

Did you guess it ? Its  $Goldman Sachs(GS)$ . (Ticker   GS). Lets take a look at its Q4 2022 earnings and see if it still fits the bill.

Sidetrack: I have covered (1) an investment management company, (2) a healthcare company and (3) 6 financial institutions; to test out this theory.

• Morgan Stanley - Click here to read it. Like the post ok. Tks.
• BlackRock - Click here to read it. Like the post ok. Tks.
• UnitedHealth Grp - Click here to read. Like the post ok. Tks.
• Citigroup - Click here to read. Like the post ok. Tks.
• JP Morgan - Click here to read. Like the post ok. Tks.
• Bank of America - Click here Click here  to read. Like he post ok. Tks.
• Wells Fargo Inc - Click here to read. Like the post ok. Tks.
• Jefferies Financial Group - Click here to read. "Like" the post ok. Tks.

• An American multinational investment bank & financial services company.
• Founded in 1869 (153 years young company).
• Ranked by revenue, it is the 2nd largest investment bank in the world (2022) accordingly to Statista.
• In US, ranked by total revenue, its #57 on the Fortune 500's list of the largest US corporations
• Like its peers (JP Morgan, Morgan Stanley, Wells Fargo  etc..) - it is considered a systemically important financial institution by the Financial Stability Board
• It is important to know that GS invests in & arranges financing for startups, and in many cases gets additional business when the companies launch its initial public offerings (IPOs). Notable IPOs of late managed by GS included Twitter, Bumble, Robinhood.
• It grew into its current position organically and via strategic merger & acquisitions.

In 2022, a year where US market has been hammered by extremely volatility - how did Goldman Sachs fare ?

Current stock price > 20 Jan 2022 stock price by +0.28%.  Not bad !

Goldman Sachs - Summary

• Total revenue came in at $10.59 Billion vs $12.64 Billion (Q4 2021); its -16.12% lower QoQ
• Net income came in at $1.18 Billion vs $ $3.81 (Q4 2021); its -69.03% lower QoQ.
• Earnings per share (diluted) came in at $3.32 per share vs $10.81 (Q4 2021); its-69.23% lower (QoQ).
• The less than stellar results were driven by lower revenues from Goldman Sachs' (a) asset & wealth management and (b) global banking businesses.
• Asset & wealth management revenue fell -27% in the fourth quarter to $3.56 billion, driven by an 80% drop in equity investment revenue to $287 million.
• That was partially offset by a +16% increase in net interest income, to just over $2 billion

Goldman Sachs - Business segment and its revenue source

• It has become a common observation across US banks in that their respective Investment Management arm/segment all fared "poorly" last year when Covid was still at its height.
• Company wide revenue decline was driven by sharply lower results in two of its main divisions, (a) Asset & Wealth management and (b) Global Banking & Markets.
• There was hardly any IPO last year. Most under-writing activities have sorta "dried up".
• Investment banking fees drop -48% to $1.87 Billion on muted issuance activity in equity and debt markets and lower advisory fees.
• Asset & Wealth Management revenue fell-27% from a year earlier to $3.56 Billion on far smaller gains on private equity holdings and markdowns in debt instruments.
• For GS whose revenue comes predominantly from underwriting activities, it is no wonder that bottomline was greatly impacted.

Goldman Sachs - Other highlights

• Like JP Morgan, GS has began its staff retrenchment exercise -laying off 3,200 staff and in the process saving $475 Million in expenses annually.
• Since 18 Oct 2022, GS's CEO David Solomon has also begun pivoting away from its previous strategy of building a full-scale digital bank with Marcus to take on US Retail banking leaders like JP Morgan and Bank of America.
• What it would embark on is to focus instead on existing Marcus customers, while aiming to market fintech products through the bank’s workplace and wealth management channels

Goldman Sachs's CEO on Q4 2022 Results

Against a challenging economic backdrop, we delivered double-digit returns for our shareholders in 2022. Our clear, near term focus is realizing the benefits of our strategic re-alignment which will strengthen our core businesses, scale our growth platforms and improve efficiency. The foundation of all our strategic efforts is our client franchise which is second to none..... David Solomon, CEO, Goldman Sachs

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Why Goldman Sachs is Both A Good Price and Good Company ?

• Banking stocks are non-cyclical in nature unlike semiconductors, construction, retail etc..
• With interest rates forecasted to continue rising to the 5% terminal rate banding means more revenue "potentially" to be earned by US financial institutions
• With a generous annual dividend of $10.00 per share (2.86% to current stock price), what is there not to like. Meta Inc.(META) - No dividends. Tesla Motors (TSLA) -No dividends.
• Comparing its current stock price and 20 Jan 2022 stock price, it has grown annually despite US market was overall down 21% for S&P 500 and -33% for Nasdaq; whatmore could an investor asks for ?
• The current challenges facing this 153 years old Grand Dame is only transitory.
• When covid blows over and the US economy returns to a more "stable" state in H2 2023; things should pick up from where they have been left off.
• Life will go on even if the Fed's 2% "ideal" inflation rate is not achieved yet. As long as there is progressive improvement on inflation tapering downwards, US market and investors will learn to live with diminishing inflation and begins investing in value stock like Goldman Sachs all over again.

• What do you think of Goldman Sachs's Q4 2022 performance compared to other banks ?
• Should the market sentiments improve in H2 2023; do you see Goldman Sachs's stock price rising even further ?

Please "Like" this post ok. Thanks. The rating is very important to me !

@TigerStars 

@CaptainTiger