Today's story stock is Goldman Sachs Group, Inc. (NYSE: GS). Goldman Sachs is all over the news today due to lots of hedge fund news out of the company. This morning Goldman Sachs announced that outside investors would pour $3 billion of new capital into its Global Equity Opportunities fund, a long-short quantitat
ive hedge fund. Also on a conference call later in the morning GS said it had no plans to shut down Global Alpha and North American Equity Opportunities, two popular funds that have incurred big losses of late.
Investors reaction to this news has been quite mixed throughout the day so far. Early in the morning investors seemed to cheer the news, bidding the stock up by over 2%. However, as of early this afternoon the stock is actually trading down about .7%. This is likely a sign that the market can't understand what these announcements mean for the overall Goldman financial health.
Another key takeaway from the conference call was that Goldman Sachs executives made mention of the precipitous fall of its stock in the last few weeks, saying that the fall in the stock price does not correlate with the overall strength of its business. This was interesting, as it seems management was trying to reassure investors that Goldman Sachs will be fine and that the market should not panic. As is common inside industries, all of the brokers have been lumped into one after the Bear Stearns debacles of late. The question in the end will be, do the other brokers such as Goldman or Lehman or Morgan Stanley have the same kind of exposure to the fixed-income fallout that Bear Stearns has had. I believe it is safe to assume that all of the brokers will have their earnings estimates cut in the coming weeks, but some of the brokers may be hit harder than others.
Just in the last few minutes there is more news out of Goldman Sachs, with Standard and Poors affirming its credit rating on GS. S&P noted Goldman's strong market positions, diversified revenue streams, and strong capitalization and liquidity as reasons to keep the rating and outlook stable.
Goldman Sachs is a strong company with a great business model, and in the end it should come out of this just fine.
I think Goldman has so much more business that just a quant fund or two that it will do little to the company's bottom line. I almost feel this way about the subprime issue and the other investment banks, but BSC has really let me down on that one. I'm waiting for some of these names to report before I do anything with them. I do like AFSI though...check that one out on bull trader.
--Doug
Posted by: Doug | August 13, 2007 4:21 PM | Permalink to Comment