Market Overview

Some Investors See Buying Opportunity as Shares of Goldman Sachs Hit 2-Year Low

Shares of Goldman Sachs (NYSE: GS) hit a 2-year low on Tuesday, as global economic uncertainty and a toughening regulatory environment weighed on the stock.

Goldman stock closed below $130 yesterday, a precipitous fall from its $175 price in January. The looming Dodd-Frank financial overhaul has hit the investment bank particularly hard, as a portion of Goldman's earnings will undoubtedly be hit.

Increased capital requirements and an exit from proprietary trading have sent investors running. But many have forgotten a key consideration: this is Goldman Sachs.

The bank has a penchant for finding profitable businesses. It can find a competitive advantage in many financial markets simply because it employs some of the most talented people in the industry.

Goldman Sachs will simply not allow itself to fall behind other banks. Though there will certainly be volatility in its near-term earnings, some investors see this time as a great opportunity to buy on long-term potential.

The bank's market capitalization now stands at $66 billion, which is only 8 times its 2010 earnings of $8.3 billion. While doubt and uncertainty seem to cloud the stock now, it wouldn't be surprising to see the stock get a short-term pop on value.

Also remember that it won't be long before Goldman executives are unrolling a more profitable business to substitute the profitability that has been lost.

Posted-In: Long Ideas Trading Ideas

 

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