This stock idea, I think, is one solid pick, GS (Goldman Sachs). Need I say more?
Of course I will. Its shares are trading around the $178 range. GS is the brokerage, investment banking leader in the world. Analyst project the shares to earn a high of $25 a share and a low of $200 in 2009. finance.yahoo.com 
That's less than 10 times earnings. If Financial woes here in the states continue, the stock could hit the low $100 range. GS has some of the brightest talent on Wall Street working for the company.
Once there is an economic turnaround I think the stock will hit the $300 range within a few years.
The company is a top performer, they skipped the subprime mess and actually benefited from it (by shorting subprime securities), is the leader in their field and should continue to do well going forward.
One small idea is to hedge, is to do a covered call. The Jan 2009 $240 calls are bidding around $7.9 per share. The maximum gain this would give you is about 40%.
You could sell the Jan 300 calls for about $1.75 which seems small but you could double down on that and sell twice as many, equaling to about $3.5 per share, yielding about 1.9% for 11 months. Assuming the shares of GS close under $300 by the January 2009 expiration, you get to keep the premium. If it goes over $300, you will be essentially short it's stock, with one side of the options, also selling the stock at $300. So, be careful if you short twice as many options vs stock that you own, it's a double edged sword. The shares of GS yield about .8% . At GS' current price it is one stock that looks attractive in any investment portfolio, for the long term investor with a metal stomach. |
