Goldman Sachs: Top 30 Affordable Stocks to Invest in During an Economic Downturn

The S&P 500 Index is inching closer to a 52-week high, despite weak earnings and economic growth. Goldman Sachs is optimistic about stocks that might be unloved but have a steady earnings growth. In this article, we bring you 30 stocks that you can buy to stabilize your earnings as the U.S. economy loses momentum.

The economy for the S&P 500 recorded negative readings in the first quarter of 2023. However, according to David Kostin, the company’s chief U.S. equity strategist, it could hit rock bottom soon, and earnings might follow suit. Here at Goldman Sachs, we use a Fluid Activity Index as our primary measure of economic activity. It is a summary of the economy’s health across several factors, including hard and soft data. While economic activity appears to have bottomed out in recent months, the indicators show that it is heading towards the lowest levels seen during the pandemic.

Goldman Sachs communicated its second consecutive quarter of negative earnings growth to the market in advance. The 3% decline was almost half of the expected consensus forecast. Kostin predicts that corporate earnings might fall by 7% in the second quarter. Nevertheless, investors appear to be concentrating on earnings growth, which resumed in the third quarter and is currently expected to continue through 2024.

In a low-growth environment, Kostin recommends investing in stable earnings stocks that have outperformed since 2011, when the ISM Manufacturing Index slumped. These stocks typically outperform relative to the markets when manufacturing data weakens. However, this relationship appears to have broken down in recent times. Nevertheless, investors can bet on a return to the average by purchasing the 30 stocks highlighted by Goldman Sachs that have shown steady earnings growth over the past decade. These stocks trade at historically low valuation premiums compared to the S&P 500 index median. Stocks with steady earnings growth still trade at a premium but lower than usual for the moment.

Here are the 30 stocks Kostin’s Goldman Sachs identified with fluctuating earnings growth of less than 10% over the past decade. Each of them displays the volatility of their ticker, sector, expected price-to-earnings ratio (PER), and earnings before interest, taxes, depreciation, and amortization (EBITDA).

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