Goldman Sachs says its new stock basket has outperformed the market over the past 20 years. The firm’s portfolio strategy desk recently introduced two new baskets based on corporate asset intensity, which was defined as “the ratio of assets, less cash and illiquid, to earnings.” Asset-light stocks can be thought of as “thin” companies – few assets, but strong growth. The ratio of light stocks to assets was 0.3, and the ratio of large groups of assets was 1.5. Each basket includes 50 stocks drawn from the S&P 500, but are sector neutral to each other. Looking back at the baskets, Goldman found that the asset-light cohort has outperformed the high-asset intensity group by 40 percentage points since 2002. “Higher returns on equities (22% vs. 15%) help explain this long-term outperformance. Over the same period, S&P 500 capex as a share of total cash usage fell from 46% to 29%.” is,” strategist Jenny Ma wrote in a note on February 28. To be sure, Ma said the asset class could advance by about 100 basis points over the next 12 months as the cost of capital declines. Higher-than-expected capital spending will also be a tailwind for major asset classes, Ma added. Take a look at some of the lean stocks that made Goldman’s screener, and where analysts see them going next. According to Goldman, semiconductor giant Nvidia has an asset leverage ratio of just 0.5. Nvidia has the highest year-to-date return on the list, at 73.1%, as well as the largest market cap. Consensus 2024 earnings per share growth for Nvidia is 87%, the firm says. Wall Street remains bullish on stocks; Fifty-one of the 55 analysts covering Nvidia have issued either a buy or strong-buy rating, per LSEG data. However, the average price target means share prices are at their peak. NVDA 1Y Mountain Nvidia Shares Another chipmaker in the basket over the past year is Broadcom. Shares are up 27% in 2024. The stock has an asset leverage ratio of 0.3, and consensus earnings per share growth this year is expected to jump 19% from 2023. A majority of analysts covering the stock also reinforce it with a buy or buy rating, according to LSEG. However, Wall Street’s average price target suggests that shares are due for a roughly 13% return from their current levels. Online dating platform operator Match Group is another asset-light company. Shares are down 4 percent in 2024 and more than 12 percent in the past 11 months, but analysts surveyed by LSEG believe the stock could rally 25.5 percent. Match Group has an asset leverage ratio of 0.3. Live Nation Entertainment is a solid company that has gained 36% over the past 12 months. Average per-share 2024 earnings estimates suggest a 44% year-over-year increase, per Goldman. The company has an asset leverage ratio of 0.4. All but two of the 19 analysts who cover Live Nation give it a strong buy or buy, per LSEG. The stock could continue its gains and rise an additional 18.3%, its average price target suggests. LYV 1Y mountain Live Nation Shares Over the past 12 months, on the other hand, some of the largest asset companies in the S & P 500 include chipmakers Microtechnology, Intel and On Semiconductor. Telecommunications services names AT&T, Verizon and T-Mobile were also included. —CNBC’s Michael Bloom contributed to this report.
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