Thursday, September 22, 2011

Goldman Sachs is Cheap!

I talked about how great it is that people can buy BRK and LUK at book value, and that JPM is selling at or below it's tangible book value per share even though JPM is capable of earning much more than 15% on that tangible equity.

The markets are falling apart now and financials are getting even cheaper.  Again, there are tons of financials that are getting cheap.  Some really cheap ones are Citigroup and Bank of America, for example.  Although these banks may rally sharply over the next few years and I assume investors will make out well, they do have a history of problems and they are large institutions tied to the GDP of this country.

However, if you look at a firm like Goldman Sachs (GS), they are much more nimble than those large banks as they can typically more easily move capital to where the opportunities exist.  They are not burdened by large consumer loan portfolios and large bank branch networks, for example.

Also, GS earns half of their net revenues in the non-U.S. market.

I just wanted to post this quickly as it seems like such a tremendous opportunity so I won't go into the details of this company.

But let's just say that GS is one of the best financial companies out there.  They did very well through the Great Recession with very little in losses (like the other of my favorites, JPM, BRK and LUK) and have managed to grow book value in the past few years despite the worst environment in 100 years (or whatever).

Anyway, the bottom line is that the book value per share of GS at the end of June 2010 was $131.44/share and the tangible book value per share was $121.60/share

And the stock is now trading at $93/share!    That's a 30% discount to book value and a 24% discount to tangible book value per share.

Not too long ago, you had to work hard and make partner to be able to buy into GS at book value, and here it is for anyone to buy at way below book value.

If that's not an opportunity, I don't know what is.


  1. Hey, I really enjoy your posts. GS is below tangible book value today. It seems like investors worry about the yield curve, 1MDB scandal and etc. It would be great if you could share with us your current thoughts on its valuation.

    1. Hi, it's cheap for sure. Double-digit ROTE seems like a great deal. This 1MDB is headline risk for a while, but at the moment, I don't think it's going to threaten GS's existence or anything like that...


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