GOLDMAN SACHS: There are only 50 stocks in the world that are perfect for this environment
- The global economy is expected to keep growing modestly over the next few years.
- Goldman Sachs has identified 50 stocks poised to perform the best in such an environment.
The global stock market is scorching hot right now, but that may not be enough for longer-term investors looking for opportunities that will remain fruitful well into the future.
That's why it's important to identify companies with strong growth profiles - ones that will stay attractive on a fundamental basis in the event of a downturn. After all, when the market is struggling, companies that can stand on their own two feet are often the most appealing to traders flailing for returns.
Fear not, Goldman Sachs has you covered. Using a framework it calls the "Rule of Ten," the firm has identified 50 global stocks poised to perform the best in the environment ahead.
What kind of environment is that? According to Goldman's economics team, it will be one characterized by the type of slow, grinding expansion that's perfect for a certain subset of stocks: those that can bootstrap their way to organic growth, with limited external assistance.
"Growth stocks typically outperform in periods of solid but unspectacular economic activity," a group led by Goldman chief US equity strategist David Kostin wrote in a client note.
Before we unveil the 50-stock list, here's a peek under the hood of Goldman's "Rule of Ten" methodology for the selection of the best possible growth stocks around the world. Each company must have:
- Realized sales growth of at least 10% in 2015 and 2016
- Estimated sales growth of at least 10% in 2017 and 2018, according to Goldman analysts
- Consensus long-term earnings growth of at least 10%
Goldman's screen excludes companies below $2 billion in market cap and those with average daily trading volume less than $10 million. It also removes stocks in the top 20% of their region's enterprise value-to-sales rankings, with the thinking being that their already-lofty valuation will limit upside.
Here's a visual representation of how Goldman whittles its list down from a universe of 2,300 companies:
The analysis returns some stocks that won't be too shocking to equity enthusiasts. Headlining the group are popular tech stocks Amazon, Tesla and Alphabet.
Without further ado, here are the full components of Goldman's global secular growth list:
- JD.com
- Wayfair
- Ningbo Joyson Electronic
- B&M European Value Retail
- YOOX Net APorter
- Ulta Beauty
- ASOS
- Zalando
- Expedia
- Five Below
- Amazon
- Norwegian Cruise Line Holdings
- Floor & Decor Holdings
- Minth Group Limited
- Domino's Pizza
- Zhejiang Huace Film & TV
- ANTA Sports Products
- Shenzhou International Group
- Tesla
- X5 Retail Group
- Sprouts Farmers Markets
- BIM Birlesik Magazalar
- Fomento Economico Mexicano
- Raia Drogasil
- Gulfport Energy Corporation
- PDC Energy
- INC Research Holdings
- Sino Biopharmaceutical
- SiteOne Landscape Supply
- Recruit Holdings
- Luxshare Precision Industry
- Crieto SA
- YY Inc.
- Lam Research
- Yelp
- MACOM Technology Solutions
- Momo Inc.
- Fortinet
- NetEase
- Zhejiang Dahua Technology
- NAVER Corp.
- Sunny Optical Technology
- Kako Corp.
- Alphabet
- Square
- 58.com
- Ultimate Software Group
- PayPal
- Summit Materials
- PT Telekomunikasi Indonesia