Goldman Sachs Group Inc - Stocks

Instrument description

Goldman Sachs is one of the world’s most prominent and remarkable financial groups that provides a wide range of services such as investment management, securities and underwriting, asset management, and prime brokerage. Goldman Sachs is regarded as the biggest investment banks in the world and it is mostly engaged in financial transactions in the US Treasury security market and it is also a leading ‘liquidity provider.

Goldman Sachs also owns the famous Goldman Sachs Bank USA, which is a direct bank and specializes in providing remote banking services through telephone, online, and banking agent network. Goldman Sachs was founded in 1869 and had its office in New York. The company excels in global investment banking, asset and investment management, and professional advice on mergers and acquisitions.

Goldman Sachs has over 38,300 employees, and the company has offices in New York, Chicago, Toronto, London, Frankfurt, Milan, Zurich, Paris, Bueno Aires, Tokyo, Beijing, and Sydney. Forbes ranked Goldman Sachs at 17 in 2017 in the list of 25 biggest banks in the world. In Fortune Global 2017, Goldman Sachs was ranked 271, and in April 2018, the company had a market capitalization of $94.75 billion.

History of Goldman Sachs

Marcus Goldman founded Goldman Sachs in 1869, and in 1880 his son in law named Samuel Sachs joined him. By 1898, Goldman Sachs had a capital of $1.6 million.

Goldman Sachs started trading on the New York Stock Exchange and issued first Initial Public Offering (IPO) in 1906 and also acquired Sears, and Roebuck and Company and Henry Goldman were pivotal in the deal as he was friend with Julius Rosenwald who was the owner of Sears. However, due to pressure from partners, Henry Goldman resigned in 1917. The Sachs family had the control of the Goldman Sachs until Waddill Catchings joined the company in 1918 and he had the largest stake by 1928. Goldman Sachs expanded to Europe at the end of the 19th century, and after the end of World War Two, the company had emerged as a leading investment bank

The Investment Banking division was formed in 1956, and the trading franchise was opened again in 1969. Goldman Sachs acquired a commodity trading company called J. Aron and Company in November 1981 and merged it with the Fixed Income division. In 1986, Goldman Sachs Asset Management unit was formed that mostly overlooks the mutual and hedge funds. The company strengthened its Trading Business Lines and launched paperless trading for the first time in NYSE.

Goldman Sachs's financial performance was badly impacted by the economic recession of 2007 and 2008. The company received a $10 billion investment from the US Treasury Department, which was given in November 2018 and was repaid in June 2009.

The year 2017 was quite good for Goldman Sachs as the company posted net revenue of $32.07 billion and net earnings of $4.29 billion. The Investment Banking segment reported $7.37 billion in net revenue. The company also ranked first when it came to global mergers and acquisitions, along with equity and stock offerings.

The share price of Goldman Sachs fell to a low of $53 during the economic crisis but surged over $100 in March 2009 and also passed the magical figure of $200 in May 2015. The share price fell again to $150 during mid-2016 but rose above $250 again at the start of 2018.

Current Business and Investment of Goldman Sachs

Goldman Sachs provides authentic and world-class financial services all over the world. The company is involved in offering investment banking and management, asset management, commercial banking, commodities, prime brokerage and mutual funds. Goldman Sachs operates in four segments

• Investment Banking

This division overlooks the management of public and private sector clients and offering financial advisory services and allowing business companies to raise capital and improve the financial health.

• Global Markets

This division allows clients and customers to buy and sell financial products and also effectively manage funding and risks.

• Asset Management

This unit helps customers and clients to secure and grow their financial assets.

• Consumer and Wealth Management

This segment provides wealth management and banking advisory services that tries to ensure that the clients achieve their financial goals.

Risk and Potential in Goldman Sachs Environment

Goldman Sachs is the world’s leading firm in the financial sector. It provides a wide assortment of services to clients, big corporations, government entities, rich individual investors, and large business organizations. SWOT analysis is a popular technique that allows a business company to evaluate its current performance and make proper future plans and strategies. The SWOT analysis of Goldman Sachs is given by

• Strengths

Goldman Sachs is a reputable global brand with an incredible position in the financial sector. The business of the company is spread all around the world and it offers a diversified portfolio. The firm has more than 38,000 employees and it invests heavily in Research and Development (R&D) as compared to its competitors. Goldman Sachs maintains a high level of customer satisfaction. Many of the business functions are automated, which has reduced costs and improve efficiency. The company has the ability to generate enormous returns on capital investments. Goldman Sachs maintains a strong relationship with dealers, retailers, and suppliers that allows the company to leverage them when needed.

• Weaknesses

The main weakness of Goldman Sachs is facing frequent litigation cases of different types, such as fraud, bribery, and underwriting bonds. The company previously had to face global economic recession and insider trading problems. Goldman Sachs has to pay huge amounts in rent as the property is rented and not purchased. There is no proper method for cash flow management. The strategies that are planned and implemented are done on research done 2 years earlier, while in today’s fast-paced world, trends are changing rapidly.

• Opportunities

Goldman Sachs can provide its unique and dependable services in emerging economies where there is a large scope in investment banking. The company must further expand and innovate its investment banking and asset management segment. The world is going digital, and Goldman Sachs must improvise and offer online sales and payment options to the clients. There is a certain reduction in taxes and interest due to the Coronavirus pandemic that can be beneficial for the company.

• Threats

Goldman Sachs faces the constant challenge of changing government regulations along with economic downturns and global crisis such as the ongoing Covid-19 that has impacted businesses significantly. The variable interest rates and falling stock market situation also affects the performance of the company. Goldman Sachs also faces competition from rival domestic brands, which includes Morgan Stanley and Merrill Lynch, as the company is operating in numerous countries, so the currency exchange movements also affect the sales and revenue.

Stock Analysis of Goldman Sachs

Goldman Sachs is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbol ‘GS.’ The company is listed under the ‘Finance’ Sector, and the industry is ‘Investment Banks/Brokers.’ Goldman Sachs is also a member of other indices such as the Dow Jones Industrial Average (DJIA), S&P-100 Index, and the S&P-500 Index.

The all-time high share price of Goldman Sachs was $273.38 on March 12, 2018, and the average price in the last 52 weeks is $205.76.

The businesses all over the world are considerably affected by Coronavirus, and financial markets are not able to get the results as expected. However, Goldman Sachs saw a record increase in revenue for years in the second quarter. The Earnings per Share (EPS) were expected to drop 27% to $4.27, while EPS rose 7.7% to $6.26. The revenue was predicted to rise 7% to $10.07 billion, but it touched $13.3 billion with 11%.

The fixed-income trading revenue of Goldman Sachs surged incredibly to $4.24 billion, with 149%, which was the best in the last nine years. The equities of the company rose to $2.94 billion, with 46%, which was best in 11 years. When talking about different segments, the Investment Banking posted $2.66 billion with 36%. Consumer and Wealth Management climbed to $1.36 billion at 9%. However, asset management fell from 17.2% to $2.1 billion.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.