Goldman Sachs Identifies 12 ‘Crowded’ Stocks Primed to Lead Amid Trade Conflict
Top performers: A select group of 12 widely held stocks are outperforming the market and poised to continue their strong momentum.
These standout stocks are forecasted to deliver sales and earnings growth surpassing the broader market.
Contrary to popular belief, Goldman Sachs highlights 12 heavily owned stocks by both mutual funds and hedge funds that are expected to significantly outperform amid escalating U.S. trade tensions. These 'shared favorites' span diverse sectors including airlines, cable, financial payments, healthcare, and technology. Key names include Adobe Inc. (ADBE), Booking Holdings Inc. (BKNG), Citigroup Inc. (C), Comcast Corp. (CMCSA), Salesforce.com (CRM), Delta Airlines Inc. (DAL), Mastercard Inc. (MA), ServiceNow Inc. (NOW), PayPal Holdings Inc. (PYPL), UnitedHealth Group Inc. (UNH), Visa Inc. (V), and Alphabet Inc. (GOOGL).
"Investor concerns about crowded trades were evident following President Trump's tariff announcement on Mexican imports," Goldman stated in its latest US Weekly Kickstart report. However, "despite tactical risks, concentrated ownership has historically been a strong indicator for positive stock returns," the firm added.
Projected Sales and Earnings Growth for Goldman’s Selected Stocks
The median stock in this exclusive list is projected to achieve a 16% increase in both 2019 sales and earnings, significantly outpacing the growth rates of typical hedge fund and mutual fund portfolios.
Source: Goldman Sachs
Implications for Investors
While individual stocks, such as Alphabet, may face setbacks—evidenced by a sharp drop following a U.S. antitrust investigation—the collective portfolio of these favored stocks has performed robustly. Year-to-date, this group has returned 18%, surpassing Goldman’s hedge fund VIP basket at 13% and mutual fund basket at 15%. Additionally, these stocks are expected to maintain higher profit margins, though they carry a notably elevated median price-to-earnings ratio of 26.
Concerns often arise that heavily favored stocks may be overvalued and offer limited upside. Yet, historical trends reveal a different narrative: since 2009, the top 20% most popular hedge fund stocks outperformed the least popular 20% in 65% of quarters. Furthermore, high-valuation popular stocks yielded a median 12-month return of 13%, outperforming the 8% median return of less favored, low-valuation stocks.
Outlook and Considerations
Goldman cautions that crowded stock positions tend to underperform during market downturns. Since 2013, these shared favorites have outpaced the S&P 500 in 60% of weeks with positive returns but only in 44% of weeks when the S&P 500 declined. Should trade tensions intensify enough to trigger a bear market, investors might consider reducing exposure to these heavily held stocks.
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