The populist uprising against Goldman Sachs (NYSE:GS) has done little to deter the bullish attitude of investors toward the company, and they continue to pour money into the financial institution, as confidence they’ll continue to excel is strong.
This is one important thing to keep in mind for investors and those watching the media circus surrounding Goldman Sachs and some other banks. While politicians and the media love to gain points through making companies look bad, at the same time you must work through the clutter to see what is really going on. And when people and institutions do that with Goldman Sachs, they obviously like what they see.
Most analysts look for a strong performance this year by Goldman, with estimates they’ll earn $18.46 a share in 2010 and increase to $20.46 a share in 2011. At this time the shares in Goldman are trading at 9 times 2010 earnings and 8.5 times 2011 earnings.
Legendary investor Warren Buffett seems to concur with this assessment with his actions, as he plowed a lot of money into the company during the worst part of the recession, and I’m sure is still looking for dips to buy in.
That’s the secret with Goldman and others of course, to buy when they’re priced below what they’re really worth. Again, that’s why we must look past the clutter and focus on the underlying fundamentals of the business of the company.
For example, Warren Buffett knew the media coverage of Goldman was largely hysterics and would pass. It’s one thing to get the blame for what’s happening in difficult times, and another to really be a poorly run company or one that is extremely shady in its dealings. Goldman is neither, contrary to the silly and mostly unprovable reports made about them.
As long as a company has negative media coverage that is more venting than based on facts and real shady dealings, it eventually passes as the news cycle changes. And even though the recession has been a long news cycle because it has been long itself, Goldman is starting to be neglected more as other stories emerge.
This is why when things are negative but not dangerous to the survival of a quality company, it’s a great buying opportunity. Goldman has been all of that for quite a while.