⭐ Goldman Sachs' Highest Quality Stocks: Part 2

👉 Happy Almost-Friday!

We’re back to finish up the two-part series of Goldman Sachs’ favorite plays.

I’ll be sharing a few of their callouts in different sectors, and briefly adding my own commentary.

If you missed the last post, you can view it below:

These are large-cap stocks that have strong balance sheets, a history of stable sales and earnings growth, above-average return-on-equity, and low historical drawdown risk. These stocks also trade at a next-twelve-months price-over-earnings premium ranking that is in the top decile relative to history.

I’m going to share some of the most interesting companies from the first batch below — with their stock prices charted alongside metrics like earnings and free cash flow.

These charts are of course not the only thing that should be used as an investment thesis. However, they are a great way to identify potential opportunity.

If there’s any of these that you want me to double-click on — please drop a comment or respond to this email! That way I know which ones to comprehensively breakdown in our Week in Review editions for paid subscribers.

Haven’t become a paid subscriber yet? It’s only $13 / month and worth every penny, in our humble opinions.

To learn more about the perks that come with subscribing, click here!

🏭 Industrials (XLI)

• Fastenal Co. (FAST)

After doing some quick research, it seems like this company might be a great name to add to the Dividend Growth Portfolio. They’ve been paying and growing their dividend for 25 years, their 5-year compounded annual growth rate is +12%, and their payout ratio is 75%.

Looking at the chart, however, their stock price may be historically overvalued at the moment. They’ll be added to my watchlist.

• Paychex Inc. (PAYX)

It seems like this company’s stock price has done a decent job of trading alongside earnings (blue line) — with a Covid-induced bubble taking place in 2020 and 2021. Historically speaking, their stock price seems to be fairly priced at the moment, with mid-single digit growth to be expected in 2025 and 2026.

It doesn’t seem very exciting on the surface.

• Cintas Corp. (CTAS)

Wow! This chart is insane. It seems like Cintas Corporation’s stock price has begun to completely detach itself from its historical reality. It sort of makes sense, as the company’s profits have doubled over the last 4 years — but this seems a bit much for my liking.

I’ll add them to my watchlist — if their stock price decides to come back down to historical norms I’ll consider nibbling.

💡 Information Technology (XLK)

• Accenture (ACN)

Accenture’s stock price seems to trade alongside their free cash flow — besides the bubble they found themselves in during Covid. I would imagine they’re also coming down from an AI-induced bubble at the moment.

Considering their free cash flow is expected to grow by +10% in 2025 and another +10% in 2026 — this one could be a great addition to the portfolio at a more favorable price. I’ll be adding it to my watchlist.

• Cadence Design Systems (CDNS)

Wow! I encourage all of you to check out this company’s 10-year chart — it’s insane. The stock is up +1,700% over the last 10 years, and +315% over the last 5 years as the company’s profits essentially quadrupled.

It seems like this company is very much benefitting from the AI-hype. This company is a leader in the EDA (electronic design automation) space — which is used to design chips, ICs, and printed circuit boards.

Seems like we missed the boat on this one, folks. With that being said, they just announced their Q1 earnings and their stock price is down -15% accordingly.

• Synopsys (SNPS)

This company seems to also be benefitting from the AI-hype. Alongside Cadence Design Systems (shared above), Synopsys is another large player in the EDA space. It seems like I need to start learning more about this space!

🪵 Materials (XLB)

• Sherwin-Williams (SHW)

It seems like I might have just found another potential addition to the Dividend Growth Portfolio — as Sherwin Williams’ stock price tends to trend in-line with their earnings (blue line).

They’ve been paying and growing their dividend every year for the last 45 years, with a payout ratio of 24% and a 5-year compounded annual growth rate of +15%. I’m definitely learning more about this company!

🏢 Real Estate (XLRE)

• American Tower (AMT)

It seems like before Covid this company was doing a great job of trending higher alongside their operating cash flow. That bubble popped in 2021, and never recovered. Today, they’re paying a decent 3.6% dividend yield.

Considering their mid-single digit operating cash flow growth expectations, I’m not interested.

If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.

If you want high-quality stock research and portfolio management tools, consider signing up for Seeking Alpha.

If you want to check out the full episode list of the Rich Habits podcast, click here.

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.