Goldman Sachs Group Inc. reversed its May 5 recommendation for investors to add to U.S. financial and consumer stocks, conceding it was “clearly wrong” about the prospects for both groups.
Goldman advised investors to “underweight” the categories by allocating less to them than their weightings in the Standard & Poor’s 500 Index. In May, the world’s biggest securities firm boosted its rating on financial companies to “neutral,” or market-weight, and assigned an “overweight” recommendation to consumer shares. Goldman’s shift contrasts with JPMorgan Chase & Co., which said today that oil’s surge to a record has created a buying opportunity for financial shares.
“We boosted our consumer discretionary and financials weights in May on the belief the sectors would benefit from bank recapitalization and fiscal stimulus,” New York-based Goldman analyst David J. Kostin wrote in a note to clients today. “Our thesis was clearly wrong in hindsight.”
This sounds familiar. The bottom line is there are very good reasons analysts are not traders.
Goldman Reverses ‘Clearly Wrong’ Call on Financials
Elizabeth Stanton and Sarah Thompson
June 23, 2008