May 07 2009
Buffet’s Pick: Is Goldman Sach’s a Good Buy?
During the worst of the bear market, Warren Buffet was approached by investment firm after investment firm asking him to buy them out. There was only one that he bought: Goldman Sachs (GS). Now that the market has rebounded a bit, the question for the slow-to-act investor is, “Is GS still a good buy?”
There are several litmus tests of investing. First is the P/E ratio. Currently the P/E is at 31, which is much higher than the desired 20. Another investor’s welcoming sign is when insider trading is taking place. Right now, Goldman Sach’s executives are not buying. Most are exercising their options, or giving stock as gifts. There are no records or recent stock buy. a desirable activity when looking to invest in a stock.
A final thing to note, Goldman Sachs recently reported a loss of profit in the last year. There is still a profit, but it is not as huge as it used to be. Morningstar has rated its financial health as a “D.”
If GS takes a dip in stock price, it might be worth grabbing. Buffet’s analysis of the basic books probably revealed good bookkeeping, as the guru from Omaha is notorious for not buying investment vehicles he doesn’t understand. If another market correction takes place and the profitability looks better, then GS would be a buy. But for now, let it pass to find other stocks on sale.
