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April 15, 2011
United States
US Weekly Kickstart
Portfolio Strategy Research
Our index forecasts, recommended sector weights, and 1Q earnings season calendar
Earnings season kicks into high gear next week when 112 firms representing 33% of S&P 500 market cap will report 1Q results
highlighted by 11 companies in our BRICs sales basket <GSTHBRIC>. We remain pro-cyclical as the core aspects of our positive
outlook remain in place. However, the distribution around our base case has widened since early December following a 9% rally in
the S&P 500 and elevated risk to the US economic outlook from higher oil prices and inflation. Accordingly, we maintain our price
target but shift our sector weights closer to benchmark and adjust our thematic recommendations in favor of international growth.
Performance Sector views and performance
David J. Kostin
The S&P 500 fell 1.4% this week. Consumer Our recommended sector weightings lost 17 bp
(212) 902-6781 david.kostin@gs.com
Staples was the best-performing sector (+1.2%) this week as Consumer Staples outperformed and Goldman Sachs & Co.
while Energy was the worst-performing sector Energy underperformed. Our recommended
(-3.6%). We expect the S&P 500 to rise to 1525 in sector weightings have generated 2 bp of alpha Stuart Kaiser, CFA
12 months (+16%). YTD. (212) 357-6308 stuart.kaiser@gs.com
Goldman Sachs & Co.
S&P 500 Earnings US Portfolio Strategy Baskets Amanda Sneider, CFA
Our top-down EPS forecasts of $96 and $106 for Our recommended trades vs. the SPX: BRICs (212) 357-9860 amanda.sneider@gs.com
2011 and 2012 reflect +15% and +11% growth, Sales <GSTHBRIC> was initiated, ROE Growth Goldman Sachs & Co.
respectively. Bottom-up consensus forecasts a <GSTHGROE> was up 0.3%, and High Sharpe ratio
Yi Zhang
17% increase in 2011 to $98, and a 14% increase <GSTHSHRP> was down 1.2%. (212) 357-6003 yi.g.zhang@gs.com
in 2012 to $112. Goldman Sachs & Co.
Our long Cyclicals <GSSBCYCL> / short
Defensives <GSSBDEFS> trade was down 2.7%.
Valuation
Top-down, S&P 500 trades at an NTM P/E of
S&P 500 stock performance this week
13.7X. Bottom-up, it trades at an NTM P/E of 13.3X
Leaders: SVU, BIIB, TYC, S, and COH
and an LTM P/B of 2.4X.
Laggards: THC, AN, DNR, FCX, and AA
The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that
could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see the end of the text. Other
important disclosures follow the Reg AC certification, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in
the U.S.
The Goldman Sachs Group, Inc. Goldman Sachs Global Economics, Commodities and Strategy Research
Goldman Sachs Global Economics, Commodities and Strategy Research 1
April 15, 2011 United States
Conversations we are having with clients: Our pro-cyclical view and 1Q earnings season
Our discussions with clients this week related to our continued pro- attractive valuation are balanced by regulatory overhang, smaller balance
cyclical outlook for US equities. The core aspects of our positive outlook sheets and a challenging interest rate environment.
for US stocks remain in place. However, the distribution around our base Conversations with clients following our change illustrate the mixed
case has widened since early December following a 9% rally in the S&P 500 view of portfolio managers on the Financials sector. Some investors note
and elevated risk to the US economic outlook from higher oil prices and the progression of events that has left risk/reward balanced. Others believe
inflation. Accordingly, we have shifted our recommended sector weights progress will soon manifest in industry data, including 1Q results, and
closer to benchmark and adjusted our thematic trade recommendations to believe we moved too soon. Although it is possible that loan growth data
gain more exposure to growth markets. will improve, we do not believe the current risk/reward supports a continued
We (1) maintain our S&P 500 year-end 2011 price target of 1500 (+14%); (2) Overweight in Financials vs. other S&P 500 sectors.
lower our Financials weighting to Neutral from Overweight and reduce the Reduce size of Health Care Underweight to 100 bp from 300 bp. We have
size of our Health Care underweight; and (3) recommend buying stocks with recommended an Underweight position in Health Care since May 2009.
high BRICs sales <GSTHBRIC> and close our Dividend Growth <GSTHDIVG> However, negative EPS revisions have stabilized and positive reaction to
and Dual Beta <GSTHBETA> trades.1 We believe these changes are acquisition and restructuring may signal a turning point for the sector.
consistent with portfolio risk reduction during periods of uncertainty. Government austerity and patent expiry remain notable headwinds.
Our S&P 500 3-, 6-, and 12-month price targets: 1375, 1425, and 1525. Themes: (1) Cyclicals; (2) BRICs; (3) ROE growth; (4) Sharpe ratio. We
US Equity Views: New 3-, 6-, and 12-month targets reflect 5%, 8% and 16% favor cyclical vs. defensive sectors. Our thematic trade recommendations
returns (April 13, 2011). Our views reflect expectations of sustained US emphasize sales exposure to emerging markets, growth in return on equity
economic expansion, moderate inflation, and accommodating monetary (ROE), and stocks with high risk-adjusted potential returns (Sharpe Ratio).
policy, but recognize the increased risks of slower growth, inflation, higher Initiating BRICs sales exposure trade Portfolio Passport: US stocks for a
oil prices, and interest rates. Our DDM-based 12-month target of 1525 growth market world (April 12, 2011). Rapid emerging market GDP growth
reflects a 16% gain from current levels. should translate into continued outperformance of US stocks with a high
Our S&P 500 earnings, sales, and margin forecasts have not changed. percentage of sales to BRICs regions. We recommend US equity investors
We maintain our S&P 500 EPS estimates of $96 in 2011 and $106 in 2012. gain exposure to those markets by buying our BRICs sales basket
Our profit margin forecasts of 8.8% and 9.0% would establish new highs. We (Bloomberg ticker: <GSTHBRIC>) and selling the S&P 500. The basket
forecast the S&P 500 will post sales growth of 7.9% in 2011 and 7.2% in 2012. identifies 50 US companies across ten sectors with high sales exposure to
Sectors: Move closer to the benchmark on balanced risk/reward. US the BRICs countries and regions. The median stock in the basket derives 76%
Sector Views: Shift sector weights closer to benchmark on balanced risk- of its sales from outside the US and 31% of its sales from BRICs regions
reward (April 14, 2011). We reduce the absolute size of our over/under compared with 28% and 0% for the S&P 500, respectively.
weight positions given a more balanced risk/reward versus four months ago. Close our Dual Beta and Dividend Growth trades. We close two thematic
Lower Financials to Neutral from 200 bp Overweight. In early December trades: (1) Buy our Dual Beta basket <GSTHBETA> and sell S&P 500. The
2010 we upgraded Financials to Overweight and identified six drivers of “investible gap” between the Goldman Sachs Economics and Portfolio
outperformance. Significant progress has been made in those areas, except Strategy forecasts and consensus has largely narrowed. The basket returned
for loan growth. The sector outperformed through mid-January but has 19% vs. 10% for the S&P 500; and (2) Buy Dividend Growth <GSTHDIVG>
matched the market since then. We believe potential tailwinds from loan and sell S&P 500. The potential for higher interest rates may cause high-
demand growth, credit reserve releases, returning cash to shareholders and yielding equities to lag. Basket returned 20% vs. 18% for the S&P 500.
Earnings season kicks into high gear next week with the first of three
major earnings weeks. 112 firms representing 33% of S&P 500 market cap
1
Note: The ability to trade this basket will depend upon market conditions, including will report 1Q results. Please see pages 5-7 for next week’s earnings
liquidity and borrow constraints at the time of trade. calendar.
Goldman Sachs Global Economics, Commodities and Strategy Research 2
The charts we are watching: Price targets, sector positioning, and thematic trades
Exhibit 1: Goldman Sachs Portfolio Strategy price targets, sector positioning, and thematic trade recommendations, as of April 14, 2011
S&P 500 Index Forecasts
S&P 500 Price Targets Current Level 3 Month 6 Month 12 Month
1315 1375 (+5%) 1425 (+8%) 1525 (+16%)
S&P 500 EPS estimates 2009A 2010A 2011E 2012E
GS Portfolio Strategy top-down $57 $84 $96 $106
Growth (% year/year) 15 47 15 11
Recommended Sector Positioning
Recommended GS Overweight / Change from S&P 500 Total Return GS Alpha
S&P 500 Sector Positioning Underweight (a) Previous Weights Weight YTD YTD
Energy 200 bp 0 bp 13% 13% 14 bp
Overweight
Information Technology 200 0 18 2 (5)
Financials 0 (200) 16 1 (5)
Consumer Discretionary 0 0 11 5 0
Industrials Neutral 0 0 11 7 0
Materials 0 0 4 2 0
Telecom Services 0 0 3 5 0
Health Care (100) 200 11 7 (5)
Utilities Underweight (100) 0 3 2 3
Consumer Staples (200) 0 11 5 0
S&P 500 0 bp 0 bp 100% 5% 2 bp
Thematic Trade Recommendations
Date
Our best trade ideas: Portfolio Strategy thematic baskets (b) Initiation Close Return
BUY BRICs Sales Basket (GSTHBRIC); SELL S&P 500
See Portfolio Passport: US Stocks for a Growth Market World (12-Apr-11) 12-Apr-11 (0.0)%
BUY ROE Growth Basket (GSTHGROE); SELL S&P 500
See 2011 Outlook: Easy money, hard market (1-Dec-10) 1-Dec-10 1.7 %
BUY Cyclicals Basket (GSSBCYCL); SELL Defensives Basket (GSSBDEFS)
See 2011 Outlook: Easy money, hard market (1-Dec-10) 1-Dec-10 3.7 %
BUY High Sharpe Ratio Basket (GSTHSHRP); SELL S&P 500
See 2010 Outlook: Cyclical start; defensive finish (7-Dec-09). 7-Dec-09 20.8 %
CLOSED: BUY Dual Beta Basket (GSTHBETA); SELL S&P 500
See 2011 Outlook: Easy money, hard market (1-Dec-10) 1-Dec-10 13-Apr-11 9.3 %
CLOSED: BUY High Dividend Growth (GSTHDIVG); SELL S&P 500
See US Equity Views (9-Aug-10) 9-Aug-10 13-Apr-11 1.6 %
(a) Sector weightings last rebalanced on 13-Apr-11. (b) US Portfolio Strategy baskets may be found on Bloomberg by typing <GSTH>. The Bloomberg page provides real-time basket performance
and current basket constituents. For access to our baskets on Bloomberg, we ask readers to contact their Goldman Sachs salesperson.
Source: Compustat, FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 3
April 15, 2011 United States
1Q 2011 Earnings Summary
Exhibit 2: S&P 500 1Q 2011 earnings summary
as of April 14, 2011
S&P 500 EQUAL-WEIGHTED
EARNINGS REVENUE Return
Number of Companies Std Dev Surprises (a) Absolute Surprises (b) Avg 1Q Std Dev Surprises (a) Avg 1Q since P/E
Reported Total % of Co's Positive Negative In-Line Positive Negative Surprise Positive Negative Surprise 28-Feb-11 (NTM)
Industrials 3 59 5% 67 % 0% 33 % 67 % 33 % 6% 33 % 0% 2% 1.5 % 17.5
Consumer Staples 7 41 17 57 0 43 71 0 11 0 43 (0) 5.1 15.6
Consumer Discretionary 12 79 15 50 8 42 58 17 1 38 8 2 0.5 17.6
Financials 4 82 5 50 25 25 75 25 12 NM NM NM (2.6) 15.2
Information Technology 8 75 11 50 0 50 75 13 6 57 14 2 (2.0) 16.7
Materials 2 30 7 0 0 100 100 0 5 0 0 (3) (0.2) 15.4
Energy 0 41 0 NM NM NM NM NM NM NM NM NM (1.5) 19.4
Health Care 0 52 0 NM NM NM NM NM NM NM NM NM 3.8 15.2
Telecom Services 0 8 0 NM NM NM NM NM NM NM NM NM 3.6 22.6
Utilities 0 33 0 NM NM NM NM NM NM NM NM NM 0.8 13.6
S&P 500 36 500 7% 50 % 6% 44 % 69 % 14 % 6% 31 % 16 % 1% 0.3 % 16.5
S&P 500 ex. Financials 32 418 8% 50 % 3% 47 % 69 % 13 % 5% 0.9 % 16.7
Comparative Data (full earnings season)
4Q 2010 499 500 100 % 41 % 9% 47 % 71 % 22 % 8% 38 % 15 % 2%
3Q 2010 500 500 100 45 10 44 74 20 7 35 19 1
2Q 2010 500 500 100 51 7 42 75 18 11 35 21 1
1Q 2010 500 500 100 52 7 39 78 15 14 42 11 2
S&P 500 CAP-WEIGHTED
EARNINGS REVENUE Return
Weight of Companies Std Dev Surprises (a) Absolute Surprises (b) Avg 1Q Std Dev Surprises (a) Avg 1Q since P/E
Reported Total % of Co's Positive Negative In-Line Positive Negative Surprise Positive Negative Surprise 28-Feb-11 (NTM)
Financials 3 16 18 % 57 % 39 % 4% 61 % 39 % (7)% NM % NM % NM % (4.1)% 12.1
Information Technology 3 18 15 47 0 53 55 44 5 46 2 2 (3.7) 13.1
Consumer Discretionary 1 11 10 38 5 57 43 30 1 44 25 2 (0.5) 15.4
Industrials 0 11 3 31 0 69 31 69 1 9 0 1 0.1 15.4
Consumer Staples 1 11 9 19 0 81 47 0 3 0 27 0 4.3 14.8
Materials 0 4 12 0 0 100 100 0 4 0 0 (2) (0.5) 13.9
Energy 0 13 0 NM NM NM NM NM NM NM NM NM (2.2) 12.1
Health Care 0 11 0 NM NM NM NM NM NM NM NM NM 3.5 11.9
Telecom Services 0 3 0 NM NM NM NM NM NM NM NM NM 5.0 17.4
Utilities 0 3 0 NM NM NM NM NM NM NM NM NM (0.1) 12.7
S&P 500 8 100 8% 43 % 14 % 44 % 56 % 34 % (0)% 32 % 10 % 1% (0.7)% 13.3
S&P 500 ex. Financials 6 84 7% 35 % 1% 64 % 53 % 32 % 4% (0.1)% 13.6
Note: 1Q earnings include quarters ending in February, March and April. (a) In-Line if reported values are within one standard deviation of consensus estimates two weeks before
reporting date. (b) Positive if greater than consensus estimates two weeks before reporting date.
Source: FactSet, Bloomberg, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 4
April 15, 2011 United States
1Q 2011 Earnings Calendar (week of April 18, 2011)
Exhibit 3: 1Q 2011 Earnings Calendar
as of April 14, 2011
YTD Mkt Cap 1Q 2011 EPS Consensus 1Q 2011 P/E
Sector Company name Ticker Rating Return ($ bil) GS Consensus Std. Dev. YTD Revisions Yr/Yr Growth (NTM)
Monday, April 18, 2011
Consumer Discretionary Gannett Co. GCI NC (4)% $3 $ 0.41 $ 0.01 3% (18)% 6.5 x
Energy Halliburton Co. HAL Buy 13 % $ 42 $ 0.57 $ 0.58 $ 0.03 (7)% 107 % 16.3 x
Financials Citigroup Inc. C Neutral (6)% $ 129 $ 0.10 $ 0.09 $ 0.02 (8)% (40)% 11.1 x
KeyCorp KEY Neutral (1) 8 0.12 0.14 0.04 31 227 13.1
Zions Bancorp ZION Neutral (3) 4 (0.13) (0.18) 0.08 (12) 55 NM
Health Care Eli Lilly & Co. LLY Sell 3% $ 36 $ 1.16 $ 1.17 $ 0.07 3% (10)% 8.5 x
Industrials Grainger (W.W.) Inc. GWW Neutral 3% $8 $ 1.79 $ 1.79 $ 0.06 4% 30 % 18.0 x
Information Technology Texas Instruments TXN Not Rated 7% $ 41 $ 0.58 $ 0.01 2% 12 % 13.3 x
Tuesday, April 19, 2011
Consumer Discretionary Omnicom Group OMC Neutral 5% $ 14 $ 0.58 $ 0.60 $ 0.02 (1)% 15 % 15.2 x
Harley-Davidson HOG Neutral 17 10 0.53 0.54 0.04 (9) 86 18.8
Energy Peabody Energy Corp. BTU Neutral 3% $ 18 $ 0.71 $ 0.61 $ 0.06 (46)% 17 % 13.0 x
Financials U.S. Bancorp USB Neutral (4)% $ 50 $ 0.53 $ 0.49 $ 0.02 2% 44 % 12.1 x
Bank of New York BK Neutral (1) 37 0.55 0.57 0.02 (4) (3) 11.9
State Street Corp. STT Buy (2) 23 0.84 0.86 0.03 0 15 12.3
Northern Trust Corp. NTRS Neutral (6) 12 0.64 0.66 0.06 (11) 3 17.2
M&T Bank Corp. MTB NC (1) 10 1.41 0.06 5 23 13.8
Regions Financial Corp. RF Neutral 4 9 (0.07) (0.10) 0.03 (30) 52 NM
Comerica Inc. CMA Neutral (10) 7 0.44 0.47 0.05 33 114 19.2
Hudson City Bancorp Inc. HCBK NC (23) 5 (0.81) 0.59 (463) (370) NM
Health Care Johnson & Johnson JNJ Neutral (2)% $ 164 $ 1.25 $ 1.26 $ 0.05 (3)% (2)% 12.3 x
Stryker Corp. SYK Neutral 12 20 0.92 0.89 0.01 2 11 16.1
Intuitive Surgical ISRG Sell 41 14 2.42 2.49 0.08 6 17 33.2
Forest Laboratories FRX Neutral 6 10 1.10 1.07 0.06 11 29 8.0
Industrials CSX Corp. CSX Buy 18 % $ 28 $ 1.06 $ 1.04 $ 0.05 3% 33 % 15.1 x
PACCAR Inc. PCAR Neutral (13) 18 0.50 0.49 0.05 (2) 158 20.3
Information Technology International Bus. Machines IBM Neutral 13 % $ 201 $ 2.26 $ 2.29 $ 0.05 2% 16 % 12.6 x
Intel Corp. INTC Neutral (6) 107 0.49 0.46 0.02 5 7 9.7
Yahoo Inc. YHOO Neutral 0 22 0.22 0.16 0.01 (12) (27) 21.7
Juniper Networks Inc. JNPR Buy* 4 21 0.34 0.32 0.01 (5) 19 24.8
Linear Technology Corp. LLTC Neutral (4) 7 0.57 0.56 0.02 (3) 22 13.9
Source: FactSet, Bloomberg, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 5
April 15, 2011 United States
1Q 2011 Earnings Calendar (week of April 18, 2011)
Exhibit 3 cont'd: 1Q 2011 Earnings Calendar
as of April 14, 2011
YTD Mkt Cap 1Q 2011 EPS Consensus 1Q 2011 P/E
Sector Company name Ticker Rating Return ($ bil) GS Consensus Std. Dev. YTD Revisions Yr/Yr Growth (NTM)
Wednesday, April 20, 2011
Consumer Discretionary Yum! Brands, Inc YUM Neutral 4% $ 24 $ 0.64 $ 0.64 $ 0.01 (0)% 8% 17.8 x
Marriott Int'l. MAR Neutral (18) 10 0.28 0.27 0.02 (7) 23 24.2
Consumer Staples Altria Group, Inc. MO Neutral 11 % $ 56 $ 0.43 $ 0.44 $ 0.01 (1)% 5% 13.2 x
Energy Noble Corp. NE Buy 20 % $ 11 $ 0.19 $ 0.18 $ 0.05 (69)% (87)% 19.3 x
Financials Wells Fargo WFC Buy* (2)% $ 159 $ 0.69 $ 0.67 $ 0.04 5% 49 % 10.6 x
American Express AXP NC 8 48 0.91 0.06 3 25 12.2
ProLogis PLD Sell 11 9 0.16 0.15 0.01 (1) NM 24.8
SLM Corporation SLM NC 16 8 0.41 0.02 7 5 8.8
Huntington Bancshares HBAN Buy* (5) 6 0.14 0.12 0.02 25 NM 12.5
People's United Financial PBCT NC (7) 5 0.12 0.01 2 50 22.5
NASDAQ OMX Group NDAQ Not Rated 17 4 0.60 0.02 7 40 11.4
Marshall & Ilsley Corp. MI NC 15 4 (0.18) 0.06 (13) 50 NM
E*Trade Financial Corp. ETFC Neutral (2) 4 0.13 0.12 0.02 58 148 25.3
Health Care Abbott Labs ABT Neutral 8% $ 79 $ 0.91 $ 0.90 $ 0.01 (11)% 7% 11.1 x
Amgen AMGN Sell (0) 51 1.27 1.29 0.05 (2) (1) 10.7
Gilead Sciences GILD Neutral 15 33 0.98 0.98 0.03 0 (1) 10.3
St Jude Medical STJ Neutral 23 17 0.79 0.78 0.01 (1) 4 15.9
Boston Scientific BSX Sell (6) 11 0.03 0.04 0.02 (61) (60) 22.3
Edwards Lifesciences EW Neutral 4 10 0.43 0.42 0.01 (5) 5 42.8
Quest Diagnostics DGX Sell 7 9 0.98 0.99 0.04 2 (1) 13.0
Industrials United Technologies UTX Buy 7% $ 77 $ 1.06 $ 1.06 $ 0.03 (4)% 14 % 15.7 x
Union Pacific UNP Neutral 6 48 1.31 1.31 0.03 (3) 24 15.0
Eaton Corp. ETN Buy* 4 18 0.80 0.77 0.09 10 62 13.9
Textron Inc. TXT Buy 11 7 0.15 0.17 0.03 (12) NM 22.6
Information Technology Apple Computer AAPL Buy* 3% $ 306 $ 5.37 $ 5.32 $ 0.26 24 % 60 % 13.9 x
QUALCOMM Inc. QCOM Buy* 7 86 0.85 0.80 0.02 19 36 17.4
EMC Corp. EMC Buy* 16 55 0.32 0.31 0.01 2 19 18.0
Amphenol Corp APH Neutral (1) 9 0.71 0.71 0.01 3 29 17.1
Western Digital WDC Not Rated 13 9 0.65 0.06 14 (62) 11.9
F5 Networks Inc. FFIV Sell (26) 8 0.86 0.86 0.01 2 54 26.1
Materials Freeport-McMoran Cp & Gld FCX Buy (13)% $ 49 $ 1.33 $ 1.24 $ 0.11 (3)% 21 % 8.8 x
Telecommunication Services AT & T Inc. T Neutral 6% $ 179 $ 0.57 $ 0.57 $ 0.02 (7)% (3)% 12.8 x
Source: FactSet, Bloomberg, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 6
April 15, 2011 United States
1Q 2011 Earnings Calendar (week of April 18, 2011)
Exhibit 3 cont'd: 1Q 2011 Earnings Calendar
as of April 14, 2011
YTD Mkt Cap 1Q 2011 EPS Consensus 1Q 2011 P/E
Sector Company name Ticker Rating Return ($ bil) GS Consensus Std. Dev. YTD Revisions Yr/Yr Growth (NTM)
Thursday, April 21, 2011
Consumer Discretionary McDonald's Corp. MCD Neutral 1% $ 80 $ 1.16 $ 1.13 $ 0.03 3% 10 % 15.3 x
International Game Technology IGT Sell (12) 5 0.22 0.20 0.02 (3) 0 17.3
Consumer Staples Philip Morris Intl PM Buy* 14 % $ 119 $ 1.05 $ 1.04 $ 0.02 2% 16 % 14.8 x
Reynolds American Inc. RAI Sell 13 12 0.59 0.58 0.02 (1) 4 13.7
Energy Schlumberger Ltd. SLB Buy 3% $ 117 $ 0.75 $ 0.77 $ 0.04 (6)% 24 % 22.6 x
Newfield Exploration Co. NFX Buy (3) 9 0.87 0.93 0.11 (18) (22) 14.8
Massey Energy Co. MEE Neutral 18 7 0.35 0.56 0.28 (9) 44 18.2
Diamond Offshore Drilling DO Buy* 15 5 1.38 1.42 0.11 (7) (32) 12.2
Financials Morgan Stanley MS Neutral (1)% $ 41 $ 0.32 $ 0.37 $ 0.18 (49)% (64)% 11.2 x
PNC Bank Corp. PNC Neutral 3 33 1.34 1.36 0.09 1 106 11.0
Travelers Cos. Inc. TRV Sell 8 26 1.57 1.55 0.15 (4) 27 9.8
Capital One Financial COF NC 18 23 1.54 0.18 28 10 9.5
BB&T Corporation BBT Sell 2 18 0.26 0.31 0.05 5 15 15.6
BlackRock Inc. BLK Neutral 2 18 2.75 2.75 0.07 4 15 15.5
Chubb Corp. CB Buy 4 18 1.26 1.21 0.17 (20) 6 11.0
T. Rowe Price Group TROW Buy* 4 17 0.77 0.75 0.02 6 32 20.4
SunTrust Banks STI Neutral (4) 15 0.07 0.11 0.05 7 124 27.1
Fifth Third Bancorp FITB Neutral (7) 13 0.23 0.25 0.05 9 378 11.7
First Horizon National FHN Neutral (7) 3 0.03 0.04 0.02 (46) 136 28.7
Janus Capital Group JNS Neutral (7) 2 0.16 0.20 0.02 4 18 13.4
Health Care United Health Group Inc. UNH Neutral 24 % $ 49 $ 0.82 $ 0.89 $ 0.07 (2)% (14)% 12.0 x
Baxter International Inc. BAX Buy* 7 31 0.92 0.93 0.01 (5) 0 12.8
Covidien Plc COV Buy 17 26 0.85 0.89 0.02 6 3 13.8
BIOGEN IDEC Inc. BIIB Sell 23 20 1.43 1.41 0.06 3 31 14.0
Laboratory Corp. of America LH Neutral 8 10 1.36 1.44 0.07 4 11 15.2
Bard (C.R.) Inc. BCR Neutral 11 9 1.46 1.46 0.01 2 17 15.9
Industrials General Electric GE Buy 10 % $ 212 $ 0.28 $ 0.28 $ 0.01 2% 33 % 15.0 x
Honeywell Int'l Inc. HON Neutral 9 45 0.84 0.81 0.02 (3) 29 15.0
Danaher Corp. DHR Not Rated 10 28 0.57 0.02 (0) 19 19.3
Ingersoll Rand IR Neutral (1) 15 0.35 0.32 0.02 (10) 100 15.4
Dover Corp. DOV Buy 11 12 0.90 0.89 0.03 11 37 15.3
Goodrich Corporation GR Neutral (4) 11 1.25 1.25 0.04 7 45 15.4
Rockwell Collins COL Neutral 7 10 0.97 0.96 0.02 1 3 15.0
L-3 Communications Holdings LLL Sell 8 9 1.79 1.82 0.05 (3) (3) 8.9
Southwest Airlines LUV NC (11) 9 0.03 0.03 (36) 0 15.9
Robert Half International RHI NC (1) 4 0.17 0.01 NM 240 31.5
Snap-On Inc. SNA NC 6 3 0.89 0.09 4 41 14.7
Information Technology Xerox Corp. XRX Neutral (6)% $ 15 $ 0.21 $ 0.22 $ 0.01 (2)% 22 % 10.0 x
SanDisk Corp. SNDK NC (6) 11 1.00 0.07 21 5 11.0
Advanced Micro Devices AMD Sell 0 5 0.12 0.05 0.03 (15) (44) 15.8
Teradyne Inc. TER Buy 20 3 0.36 0.37 0.02 88 12 9.7
Materials Du Pont (E.I.) DD Not Rated 9% $ 50 $ 1.36 $ 0.03 5% 10 % 14.9 x
Newmont Mining Corp. (Hldg. Co.) NEM NC (6) 28 1.02 0.12 (12) 23 14.3
Air Products & Chemicals APD Neutral 0 19 1.39 1.39 0.01 2 13 15.5
PPG Industries PPG Buy* 11 15 1.34 1.31 0.07 31 87 14.6
Nucor Corp. NUE Neutral 3 14 0.37 0.34 0.07 (21) 240 16.4
Sherwin-Williams SHW Neutral 1 8 0.54 0.52 0.05 15 30 16.8
Telecommunication Services Verizon Communications VZ Buy* 8% $ 107 $ 0.51 $ 0.51 $ 0.02 (5)% (9)% 17.1 x
Utilities American Electric Power AEP Neutral (1)% $ 17 $ 0.87 $ 0.80 $ 0.05 (1)% 5% 11.3 x
Source: FactSet, Bloomberg, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 7
April 15, 2011 United States
S&P 500 Performance
Exhibit 5: S&P 500 price return and daily trading volume
Exhibit 4: S&P 500 sector performance over the last week
as of April 14, 2011
as of April 14, 2011
1,400 9
Consumer Staples 1.2
1,300 S&P 500 S&P 500 daily price level (lhs) 8
Health Care 0.8 200-day moving average
7
Shares traded (billions)
Telecom Services (0.3) 1,200
S&P 500 Price Level
6
Cons Discretionary (0.7) 1,100
5
Utilities (1.0) 1,000
4
Information Tech (1.3) 900
3
S&P 500 (1.4) 800 2
Industrials (1.9) 700
S&P 500 daily trading volume (rhs) 1
Financials (2.9)
600 0
Materials (3.4)
14-Apr-09
14-Oct-09
14-Apr-10
14-Oct-10
14-Apr-11
14-Aug-09
14-Dec-09
14-Aug-10
14-Dec-10
14-Jun-09
14-Jun-10
14-Feb-10
14-Feb-11
Energy (3.6)
(4.0) (3.0) (2.0) (1.0) 0.0 1.0 2.0
1-week Total Return (%)
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 6: S&P 500 sector performance over time Exhibit 7: BEST and WORST performing S&P 500 STOCKS BY SECTOR
as of April 14, 2011 as of April 14, 2011
Total Return Percentage Change (%) BEST STOCKS WORST STOCKS
1-Week 1-Month 3-Month 6-Month YTD 12-Month Return (%) Return (%)
Energy (4)% 2% 8% 30 % 13 % 29 % Sector Ticker 1-week YTD Ticker 1-week YTD
Cons Discr COH 6% (1)% AN (10)% 15 %
Health Care 1 4 5 9 7 7
Consumer Staples SVU 17 11 DF (5) 12
Industrials (2) 2 4 15 7 16
Energy EP 2 33 DNR (9) 17
Consumer Staples 1 5 5 9 5 13
Financials CBG 3 38 GNW (8) (7)
Cons Discretionary (1) 2 3 14 5 15
Health Care BIIB 13 23 THC (12) (1)
Telecom Services (0) 7 6 11 5 28
Industrials TYC 10 26 PWR (8) 5
Utilities (1) (0) 1 2 2 10 Info Tech NTAP 4 (12) TER (9) 20
Information Tech (1) (0) (2) 9 2 6 Materials BLL (0) 7 FCX (9) (13)
Materials (3) 4 1 15 2 18 Telecom Services S 7 17 CTL (1) (12)
Financials (3) (1) (3) 11 1 (4) Utilities PPL 4 3 AES (3) 5
S&P 500 (1)% 2% 2% 13 % 5% 11 % S&P 500 SVU 17 % 11 % THC (12)% (1)%
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 8
April 15, 2011 United States
S&P 500 Performance (cont’d)
Exhibit 8: TOP 10 performing SUB-SECTORS over the last week Exhibit 9: BOTTOM 10 performing SUB-SECTORS over the last week
as of April 14, 2011 as of April 14, 2011
Apparel Accessories &… 4 Consumer Electronics (5)
Food Retail 3 Construction Materials (5)
Real Estate Services 3 Diversified Banks (5)
Footwear 3 Electronic Manufacturing Services (5)
Biotechnology 2 Multi-Sector Holdings (6)
Packaged Foods & Meats 2 Education Services (6)
Diversified Support… 2 Construction & Engineering (7)
Wireless Telecom Services 2 Aluminum (9)
Diversified REITs 2 Diversified Metals & Mining (9)
Health Care Technology 2 Health Care Facilities (12)
0 1 2 3 4 (14) (12) (10) (8) (6) (4) (2) 0
1-week Total Return (%) 1-week Total Return (%)
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 10: TOP 10 performing S&P 500 STOCKS over the last week Exhibit 11: BOTTOM 10 performing S&P 500 STOCKS over the last week
as of April 14, 2011 as of April 14, 2011
Return (%) Return (%)
Company Name Ticker Sector 1-week YTD Company Name Ticker Sector 1-week YTD
Supervalu Inc. SVU Consumer Staples 17 11 Tenet Healthcare Corp. THC Health Care (12) (1)
BIOGEN IDEC Inc. BIIB Health Care 13 23 AutoNation, Inc. AN Cons Discr (10) 15
Tyco International TYC Industrials 10 26 Denbury Resources Inc. DNR Energy (9) 17
Sprint Nextel Corp. S Telecom Services 7 17 Freeport-McMoran Cp & Gld FCX Materials (9) (13)
Coach, Inc. COH Cons Discr 6 (1) Alcoa Inc AA Materials (9) 8
GameStop Corp. GME Cons Discr 6 11 Teradyne Inc. TER Info Tech (9) 20
Expedia Inc. EXPE Cons Discr 6 (5) Range Resources Corp RRC Energy (9) 17
Limited Brands, Inc. LTD Cons Discr 5 23 Genworth Financial Inc. GNW Financials (8) (7)
Lorillard LO Consumer Staples 5 24 Quanta Services Inc. PWR Industrials (8) 5
Iron Mountain Inc. IRM Industrials 4 39 Fluor Corp. FLR Industrials (7) 1
S&P 500 Average (1) 7 S&P 500 Average (1) 7
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 9
April 15, 2011 United States
Earnings and Sales
Exhibit 12: EARNINGS GROWTH: S&P 500 bottom-up consensus estimates Exhibit 13: SALES GROWTH: S&P 500 bottom-up consensus estimates
as of April 14, 2011 as of April 14, 2011
2011E Earnings Per Share Growth Annual 2011E Sales Per Share Growth Annual
1QE 2QE 3QE 4QE 2011E 2012E 1QE 2QE 3QE 4QE 2011E 2012E
Energy 29 32 45 34 35 13 Energy 33 42 42 42 40 3
Materials 33 38 26 16 29 14 S&P 500 11 12 12 12 11 5
Financials 13 24 20 45 25 22 Information Technology 11 9 8 9 9 8
S&P 500 15 17 17 20 17 14 Materials 10 8 7 9 8 6
Information Technology 23 18 15 15 17 12 Industrials 9 9 6 5 7 7
Industrials 19 16 12 9 14 18 Health Care 5 5 7 5 5 3
Health Care 12 13 12 16 13 6 Consumer Discretionary 4 4 6 7 5 7
Consumer Discretionary 5 7 13 12 9 16 Consumer Staples 5 5 5 2 4 6
Consumer Staples 5 7 9 8 7 10 Telecom Services (2) 3 1 3 1 3
Telecom Services (7) (3) 5 20 3 16
Utilities (8) 2 (2) 13 (0) 1
S&P 500 (ex-Financials) 15 16 17 16 16 12
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 14: TOP-DOWN vs. BOTTOM-UP: Goldman Sachs vs. Consensus Exhibit 15: TOP-DOWN vs. BOTTOM-UP: Sales and Margins
as of April 14, 2011 as of April 14, 2011
10%
Bottom-up Consensus
Contribution to EPS Annual earnings growth rates 9% S&P 500 Net Profit Margin Forecast
GS Top-Down EPS Bottom-up GS Top-Down Bottom-Up (trailing four quarters)
8% 8.5
2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E
Energy $13 $14 $14 $16 22 % 10 % 35 % 13 % 7%
Materials 3 3 3 4 11 5 29 14
6%
5.9
Telecom Services 3 3 2 3 14 (0) 3 16
Goldman Sachs
5%
Information Technology 17 20 18 20 13 14 17 12 Portfolio
Strategy
Industrials 9 10 9 11 8 12 14 18 4% Forecast
4.7
Health Care 12 13 12 13 12 6 13 6 4.1
3%
Consumer Staples 9 10 9 10 7 6 7 10
1979
1984
1989
1994
1999
2004
2009
2014
Consumer Discretionary 9 9 9 10 5 5 9 16
Utilities 3 3 3 3 4 (1) (0) 1 Goldman Sachs Consensus
S&P 500 ex-Financials 78 85 81 91 11 8 16 12 Portfolio Strategy Bottom-Up
Financials 18 21 17 21 31 20 25 22 2011E 2012E 2011E 2012E
S&P 500 Operating EPS $96 $106 $98 $112 15 % 11 % 17 % 14 % Sales Growth 8.1 % 7.2 % 11.5 % 5.2 %
Margin Level 8.8 % 9.0 % 8.9 % 9.5 %
Margin Change (%) Y/Y 4 1 5 7
Margin Change (bp) Y/Y 31 13 39 61
Source: FactSet and Goldman Sachs Global ECS Research. Source: Compustat, FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 10
April 15, 2011 United States
Revisions
Exhibit 16: EARNINGS and SALES REVISIONS Exhibit 17: Stocks with the most POSITIVE and NEGATIVE EPS REVISIONS
Aggregate dollars % change, as of April 14, 2011 as of April 14, 2011
EPS REVISIONS SALES REVISIONS POSITIVE 2011 EPS REVISIONS NEGATIVE 2011 EPS REVISIONS
1 month 3 month 1 month 3 month 1 month 3 month 1 month 3 month
11E 12E 11E 12E 11E 12E 11E 12E Ticker Revis. Return Revis. Return Ticker Revis. Return Revis. Return
Energy 7.7 % 7.6 % 15.0 % 12.2 % 9.9 % 7.5 % 16.5 % 13.3 % ZION 631 % 1% (83)% (5)% XL (37)% 10 % (45)% 3%
S&P 500 0.7 1.1 2.0 2.4 2.2 1.9 4.2 4.2
DFS 30 9 34 18 MI (24) 2 (70) 10
Telecommunication Services 0.2 0.5 (4.3) (4.4) 2.9 3.6 3.7 5.5
RF 25 (2) NM (3) ACE (15) 8 (18) 9
Industrials 0.2 0.1 1.6 2.3 (0.3) (0.5) 0.1 0.8
DNR 19 (3) 43 17 MSI (14) 7 (30) 15
Information Technology 0.1 0.5 4.4 4.2 0.1 0.6 1.7 2.8
APC 15 3 31 (0) VMC (13) 2 (211) 6
Materials 0.1 0.5 3.9 4.1 0.5 1.0 4.3 4.5
Consumer Staples 0.0 0.0 (0.2) (0.5) 0.2 0.0 0.9 0.7
MUR 15 5 6 (1) MS (13) (4) (16) (8)
Health Care (0.0) 0.0 (0.9) (0.2) 0.2 0.6 0.8 0.9 COG 15 14 139 36 LEN (8) (6) (7) (12)
Utilities (0.2) 0.3 (0.8) (0.3) NM NM NM NM TSO 15 1 53 39 APOL (8) (4) (8) (6)
Consumer Discretionary (0.4) (0.0) (0.2) 1.1 1.6 1.4 2.5 3.8 COP 13 3 22 16 MMI (6) (6) (27) (31)
Financials (2.0) (0.0) (3.3) (0.9) NM NM NM NM HES 13 0 26 (3) NEM (6) 10 (19) 3
S&P 500 1% 2% 2% 2% 1% 2% 2% 2%
Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global ECS Research. Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global ECS Research.
Exhibit 18: S&P 500 1-Month EPS Revision Sentiment vs. 1-Month Return Exhibit 19: 1-Month Earnings Revision Sentiment by SECTOR
as of April 13, 2011 as of April 13, 2011
30 %
60% 30 %
25 %
S&P 500 1-Month FY2 EPS Revision Sentiment (lhs)
40% [(# pos. revisions - # neg. revisions)/ total revisions] 20 % 20 % 1-Month Earnings Revision Sentiment by Sector
1-Month Revision Sentiment
S&P 500 Monthly % Return
[(# pos. revisions - # neg. revisions)/ total revisions]
15 %
Earnings Sentiment
20% 10 %
10 %
(0)% 0% 5%
0%
(20)% (10)%
(5)%
Price Performance (rhs)
(10)%
(40)% (20)%
Materials
S&P 500
Info Tech
Energy
Telecom Services
Health Care
Utilities
Consumer Discr
Consumer Staples
Industrials
Financials
(60)% (30)%
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global ECS Research. Source: FirstCall, I/B/E/S, FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 11
April 15, 2011 United States
Valuation
Exhibit 20: Aggregate valuation metrics for S&P 500 and sectors Exhibit 21: Standard deviation vs. 10-year history (Z-Score)
bottom-up consensus valuation, as of April 14, 2011 bottom-up consensus, as of April 14, 2011
EV/ EV/ Price/ FCF PEG NTM EV/ EV/ Price/ FCF PEG Median
Sales EBITDA Book Yield Ratio P/E Sales EBITDA Book Yield P/E Ratio Z-Score
S&P 500 1.4x 8.1x 2.4x 5.8 % 1.3x 13.3x S&P 500 (0.7) (1.1) (0.8) (0.7) (1.1) (0.1) (0.8)
Telecommunication Services 1.9 6.2 2.0 10.4 3.2 17.4 Health Care (1.4) (1.5) (1.2) (1.5) (1.0) 0.9 (1.3)
Industrials 1.8 10.8 3.1 6.3 1.2 15.4 Information Technology (0.2) (1.3) 0.6 (1.3) (1.4) (1.3) (1.3)
Consumer Discretionary 1.4 8.2 3.0 6.5 1.1 15.4 Utilities NM (0.2) (0.3) (0.2) 0.6 3.1 (0.2)
Consumer Staples 1.3 9.4 3.6 5.4 1.6 14.8 Financials NM NM (1.3) NM 0.2 0.6 0.2
Materials 1.5 8.6 3.1 5.1 1.7 13.9 Consumer Discretionary 2.8 0.8 2.4 (0.7) (0.2) (1.0) 0.3
Information Technology 2.2 8.6 3.7 7.1 1.0 13.1 Consumer Staples 1.6 0.8 (0.6) 0.4 0.4 0.3 0.4
Materials 1.2 0.3 1.7 0.7 0.2 0.8 0.8
Utilities NM 7.1 1.5 1.8 3.7 12.7
Energy (0.7) 0.8 0.8 1.2 1.0 (0.2) 0.8
Financials NM NM 1.2 NM 1.4 12.1
Industrials 0.8 1.1 2.5 0.9 1.8 (0.5) 1.0
Energy 1.0 6.6 2.5 2.0 1.1 12.1
Telecommunication Services (0.3) 1.1 1.0 (0.4) 2.5 2.2 1.0
Health Care 1.2 7.4 2.6 7.7 1.4 11.9
Source: Compustat, FirstCall, via FactSet, and Goldman Sachs Global ECS Research. Source: Compustat, FirstCall via FactSet, and Goldman Sachs Global ECS Research.
Exhibit 22: Historical NTM P/E and LTM P/B values for the S&P 500 Exhibit 23: Top stocks by fastest 2011E earnings growth and lowest NTM P/E
aggregate bottom-up consensus valuation, as of April 14, 2011 by sector, as of April 14, 2011
30 GROWTH VALUE
25 Fastest EPS Growth (%) Lowest P/E (x)
P/E Sector Ticker 2011E 2012E Ticker NTM Rel to SPX
NTM P/E (x)
20
15 Cons Discr HOG 97 28 GCI 6.5 0.5
10
13.3 Consumer Staples EL 24 17 SVU 9.0 0.7
5 10-yr rolling avg
0
Energy VLO 88 8 CVX 8.4 0.6
1/76 1/79 1/82 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09 Financials HBAN 85 33 HIG 6.9 0.5
Health Care ESRX 29 21 FRX 8.0 0.6
6
5 Industrials PCAR 95 47 LLL 8.9 0.7
P/B
LTM P/B (x)
4 Info Tech NVDA 59 23 LXK 7.5 0.6
3
Materials CF 92 (9) CLF 7.8 0.6
2
10-yr rolling avg
1 2.4 Telecom Services CTL 70 1 T 12.8 1.0
0
Utilities FE 19 (5) AES 9.4 0.7
1/76 1/79 1/82 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09
Source: Compustat, FactSet, and Goldman Sachs Global ECS Research. Source: Compustat, FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 12
April 15, 2011 United States
S&P 500 Factor Performance
(a)
Exhibit 24: S&P 500 factor return ranking for the week ended April 14, 2011
Last Week Spread (%) Performance Spread of Top Quintile Less Bottom Quintile (%)
Last Last Five Trading Days Last Last
(b) (2) (1) 0 1 2 3
Growth Metrics Week 8-Apr 11-Apr 12-Apr 13-Apr 14-Apr Month Quarter
EPS Growth 0.3 (0.5) 0.3 0.7 (0.2) (0.0) (0.0) (4.2)
Sales Growth 0.3 (0.3) (0.0) 0.3 0.6 (0.3) (0.6) (4.5)
GROWTH 0.3 (0.5) 0.1 0.6 0.3 (0.2) (1.0) (6.0)
EBITDA Growth 0.0 (0.6) 0.1 0.6 0.1 (0.1) (0.4) (5.5)
(b)
Value Metrics
EV/DACF 2.6 (0.3) 0.9 0.9 0.6 0.5 1.9 1.9
EV/EBITDA 2.4 (0.4) 0.8 0.6 0.8 0.5 0.6 (0.3)
VALUATION 2.3 (0.4) 0.6 0.7 1.0 0.5 0.7 0.6
P/E 1.7 (0.2) 0.6 0.3 0.7 0.3 2.3 2.1
P/B 1.6 (0.2) 0.7 0.5 0.6 (0.1) 2.2 3.6
EV/FCF 0.5 (0.0) (0.6) (0.1) 0.5 0.8 0.7 5.7
P/DIV (0.2) (0.2) (0.1) (0.1) 0.9 (0.6) 2.1 1.5
(b)
Profitability Metrics
ROE 1.3 0.0 0.5 0.5 0.5 (0.3) 2.6 3.7
PROFITABILITY 0.6 (0.2) 0.4 0.1 0.5 (0.3) 1.0 1.3
CROCI 0.3 (0.0) 0.4 (0.2) 0.5 (0.5) (0.2) (1.7)
ROCE 0.2 (0.3) 0.3 0.1 0.5 (0.4) 2.3 2.3
(c)
Other Metrics
Short Interest Level (0.9) (0.4) (0.3) (0.0) (0.1) (0.1) (0.8) (1.3)
Equity Capitalization 0.8 0.3 0.4 (0.0) 0.0 0.1 (1.1) (1.3)
(a) Factor return analysis uses S&P 500 companies included in the Goldman Sachs Americas coverage universe with stock prices greater than $5 at the time of publication.
(b) Growth, Value and Profitability analysis is based on Goldman Sachs Investment Profile scores (“IP Scores”). Growth, value and profitability metrics are indexed based on composites of several methodologies to
determine the stocks percentile ranking within the region’s coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year’s estimate over current year’s estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE.
Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book.
(c) “Other metric” analysis based on current market prices and data sourced from NASDAQ and NYSE via FactSet.
Source: NASDAQ and NYSE via FactSet, IDC, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 13
April 15, 2011 United States
Style and Size
Exhibit 25: Total return by style and size over time Exhibit 26: Total return by SECTOR for S&P 500 vs. Russell 2000
as of April 14, 2011 as of April 14, 2011
Total Return Percentage Change (%) Weight (%) 1-Week (% Return) YTD (% Return)
Sector SP500 R2000 SP500 R2000 ∆ (bps) SP500 R2000 ∆ (bps)
1-Week 1-Month 3-Month 6-Month YTD
Consumer Staples 11 3 1 (1) 257 5 5 14
Large Cap vs. Small Cap 223
Industrials 11 16 (2) (4) 7 4 305
S&P 500 (1) 2 2 13 5 Cons Discretionary 11 13 (1) (3) 186 5 3 217
Russell 2000 (3) 4 3 18 6 Energy 13 7 (4) (5) 119 13 13 (34)
Large vs. Small (bps) 117 (228) (63) (502) (82) Utilities 3 3 (1) (2) 118 2 4 (180)
Information Tech 18 19 (1) (2) 115 2 9 (661)
Health Care 11 12 1 (0) 90 7 12 (432)
Growth vs. Value Materials 4 6 (3) (4) 28 2 8 (628)
Russell 1000 Growth (1) 2 2 14 5 Financials 16 20 (3) (2) (48) 1 1 28
Russell 1000 Value (2) 1 3 13 5 Telecom Services 3 1 (0) 2 (281) 5 6 (177)
Growth vs. Value (bps) 41 51 (25) 78 (7) Index 100 100 (1) (3) 117 5 6 (82)
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 27: GROWTH vs. VALUE relative performance over time Exhibit 28: LARGE CAP vs. SMALL CAP relative performance over time
Russell 1000 Growth vs. Value, as of April 14, 2011 S&P 500 vs. Russell 2000, as of April 14, 2011
110
105
S&P 500 outperforming
Value outperforming
105
100
95 100
90 95
85 90
Growth outperforming Russell 2000 outperforming
80 85
Jan-09
Jul-09
Sep-09
Nov-09
Jan-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-09
May-09
Mar-10
May-10
Mar-11
May-11
Jan-09
Jul-09
Sep-09
Nov-09
Jan-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-09
May-09
Mar-10
May-10
Mar-11
May-11
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 14
April 15, 2011 United States
Global Equity Market and Mutual Fund Performance
Exhibit 29: GLOBAL EQUITY MARKET performance over the past week Exhibit 30: US EQUITY MUTUAL FUND performance vs. benchmark
as of April 14, 2011 as of April 14, 2011
Avg. Total Return (%) Stdev No. of AUM
Japan (Nikkei) 3 Lipper Indices 1-week YTD 1-Week YTD Funds $ bil
Korea (KOSPI) 1 Large-Cap Core Funds (1.3) 4.6 0.4 1.3 30 380
Germany (Dax) 1 Benchmark: S&P 500 (1.4) 5.1
Australia (ASX 200) 0 Out / (Underperformance) (bps) 9 (50)
Europe (DJ Stoxx 600) (0)
Large-Cap Growth Funds (1.3) 3.6 0.5 2.6 30 415
France (CAC 40) (0)
Benchmark: Russell 1000 Growth (1.2) 5.3
UK (FTSE 100) (0)
Out / (Underperformance) (bps) (5) (177)
China (MSCI China) (1)
Large-Cap Value Funds (1.6) 5.3 0.4 1.0 30 196
Mexico (Bolsa) (1)
Benchmark: Russell 1000 Value (1.6) 5.4
Spain (IBEX 35) (1)
Out / (Underperformance) (bps) 4 (14)
U.S. (S&P 500) (1)
Brazil (Bovespa) (3) Small-Cap Core Funds (2.5) 6.0 0.4 1.6 30 159
Benchmark: Russell 2000 (2.6) 5.9
(4) (3) (2) (1) 0 1 2 3 4 Out / (Underperformance) (bps) 12 13
% Weekly price change
Source: FactSet and Goldman Sachs Global ECS Research. Source: Lipper, FactSet, and Goldman Sachs Global ECS Research.
Exhibit 31: GLOBAL EQUITY MARKET performance over time Exhibit 32: International and other MUTUAL FUND performance
as of April 14, 2011 as of April 14, 2011
Price Return (%) USD Avg. Total Return (%) Stdev No. of AUM
1-Week 1-Month 3-Month 2011 YTD 2010
Lipper Indices 1-week YTD 1-week YTD Funds $ bil
Spain (IBEX 35) (1) 6 11 16 (23) International Equity
France (CAC 40) (0) 6 8 12 (10) Global Funds (1) 5 0.6 1.5 30 193
Germany (Dax) 1 8 9 11 9
International Funds (0) 5 0.7 1.7 30 479
Korea (KOSPI) 1 13 4 9 25
European Funds (0) 8 0.5 1.7 10 NA
Europe (DJ Stoxx 600) (0) 5 6 8 2
Emerging Market Funds (1) 2 0.4 1.3 29 NA
Australia (ASX 200) 0 10 8 6 11
China (MSCI China) (1) 5 2 6 5 Real Estate and Natural Resources
UK (FTSE 100) (0) 4 2 6 6 Real Estate 0 6 0.3 0.8 30 50
U.S. (S&P 500) (1) 1 2 5 13 Natural Resource (4) 9 0.3 2.8 10 NA
Mexico (Bolsa) (1) 4 0 1 27 Fixed Income
Brazil (Bovespa) (3) 4 (1) 0 6 General U.S. Government Funds Index 0 (0) 0.3 1.5 30 NA
Japan (Nikkei) 3 (1) (8) (8) 11
A Rated Bond Funds Index 0 1 0.2 0.8 30 NA
BBB Rated Funds Index 0 2 0.3 1.6 30 NA
Average (0) 5 4 6 7
Source: FactSet and Goldman Sachs Global ECS Research. Source: Lipper, FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 15
April 15, 2011 United States
ETF Analysis: Composition, Valuation, Growth and Ownership
Exhibit 33: Selected ETF analysis for the week ended April 14, 2011 (a) (b)
ETF Description Composition Performance (%) Valuation Growth (%) Ownership
Market Top Stocks as Valuation Short Median
(a)
Cap No. of % of ETF Price Change P/E P/B Div Sales Growth Earnings Growth Interest Hedge Fund
(c)
Sector / sub-sector Index ETF $ mil Stocks 1 5 10 1 Wk YTD NTM LTM Yield 2011 2012 2011 2012 Days Own (%)
S&P 500 SPX SPY 89,695 500 3 11 19 (1) 5 13 2.3 1.9 10 6 16 13 1.9 3.3
S&P 100 OEX OEF 2,993 100 6 18 30 (1) 4 12 2.3 2.1 12 6 16 13 1.3 1.9
Nasdaq-100 NDX QQQ 24,695 100 20 36 46 (1) 4 15 3.9 0.7 16 10 18 15 1.6 4.2
Consumer Discretionary IXY XLY 2,230 79 6 28 44 (1) 4 15 2.8 1.5 8 6 15 16 2.3 5.4
Homebuilders SPHOME XHB 890 35 5 21 39 (1) 5 27 2.0 1.1 3 10 197 79 3.2 5.2
Retail IRH RTH 238 18 18 58 83 0 2 15 2.8 1.8 6 5 11 13 1.9 3.3
Retail SPSIRETR XRT 486 92 2 7 13 0 3 17 2.6 0.8 5 4 15 20 2.9 6.8
Consumer Staples IXR XLP 3,728 41 14 45 65 1 5 15 3.4 3.0 5 4 8 10 2.3 2.0
Energy IXE XLE 9,932 41 17 48 62 (4) 12 13 2.5 1.5 23 9 34 14 1.7 4.2
Clean Energy ECO PBW 534 57 3 12 23 (4) (3) 21 2.1 0.3 26 14 NM 37 4.1 4.1
Natural Resources SPGSSINR IGE 2,431 144 8 30 43 (4) 8 14 2.4 1.3 21 9 35 16 1.9 4.1
Oil & Gas E&P SPSIOP XOP 1,168 72 2 8 16 (5) 16 21 2.7 0.4 18 13 119 40 2.1 6.2
Oil Services OXH OIH 3,116 14 18 65 92 (4) 11 18 2.2 0.7 17 13 15 30 1.6 4.2
Financials IXM XLF 8,109 82 9 39 53 (3) 1 12 1.1 1.4 NM NM 21 23 1.7 3.0
Banks BKX KBE 1,900 24 9 36 59 (3) (2) 13 1.1 1.5 NM NM 51 34 1.1 3.0
Broker-Dealers DJSINV IAI 166 26 9 34 57 (3) 2 15 1.5 1.1 NM NM 25 25 1.4 3.6
Insurance KIX KIE 211 24 9 36 57 (3) 1 11 1.0 1.8 NM NM 16 27 2.3 3.7
Real Estate DJUSRE IYR 3,090 81 8 24 39 0 5 16 2.4 4.1 NM NM 9 7 5.1 2.9
Regional Banks KRX KRE 645 50 3 14 26 (3) (0) 22 1.3 1.8 NM NM NM 59 8.1 2.0
REITs RMZ VNQ 8,735 104 9 27 43 1 5 17 2.4 3.5 NM NM 11 8 5.4 2.7
Health Care IXV XLV 3,226 52 12 41 57 1 7 12 2.6 2.2 4 3 4 6 2.2 4.5
Biotech SPSIBI XBI 482 44 4 18 34 2 11 NM 6.4 0.0 7 16 NM NM 4.0 9.4
Pharmaceuticals IPH PPH 519 14 23 77 96 1 4 11 2.6 3.4 4 0 4 2 2.0 3.7
Industrials IXI XLI 3,976 59 11 32 50 (2) 6 15 3.2 2.0 7 8 18 18 2.2 2.2
Transportation TRAN IYT 693 20 10 43 72 (1) 3 20 2.7 1.6 9 8 18 36 2.4 3.4
Information Technology IXT XLK 7,031 83 12 40 60 (1) 2 14 3.3 1.6 9 7 13 12 1.5 4.0
Semiconductors SOXXIV SOXX 226 30 8 38 58 (3) 4 12 3.3 1.3 13 7 10 9 1.7 4.3
Semiconductors XSH SMH 561 18 22 65 86 (3) 5 12 3.4 1.9 10 6 6 7 1.5 3.9
Software SPGSTISO IGV 561 52 10 36 57 (0) 6 19 4.2 0.4 9 9 13 15 2.2 4.1
Telecom Services DJSTELT IYZ 631 30 16 49 70 1 2 31 2.2 3.2 10 4 50 40 2.9 5.7
Materials IXB XLB 2,805 30 11 48 68 (4) 2 14 3.1 1.8 11 6 35 13 1.8 3.3
Gold Miners GDM GDX 6,713 30 15 46 68 (2) 0 18 2.7 0.6 25 7 61 8 1.1 3.2
Metals & Mining SPSIMM XME 1,476 43 4 16 29 (4) 5 17 2.4 0.7 16 9 135 36 2.1 5.3
Steel STEEL SLX 263 26 15 51 74 (4) (1) 10 1.8 1.4 18 10 62 15 1.8 2.4
Utilities IXU XLU 4,054 33 8 34 55 (1) 1 13 1.5 4.5 NM NM (2) (0) 2.2 1.9
(a) Performance of the underlying index.
(b) Valuation, growth and ownership metrics are bottom-up aggregations of consensus forecasts, except where noted.
(c) Hedge Fund ownership data based on 4Q 2010 13-F filings.
Source: Compustat, First Call, Lionshare via FactSet, IDC, and Goldman Sachs Global ECS Research. See our Goldman Sachs ETF Bloomberg page <GETFG> or contact the desk at 1-888-ETF-DESK for more information.
Goldman Sachs Global Economics, Commodities and Strategy Research 16
April 15, 2011 United States
Fund Flows
Exhibit 34: Domestic equity mutual fund flows, 4-week moving average Exhibit 35: US EQUITY MUTUAL FUND performance vs. benchmark
week ended April 13, 2011 week ended April 13, 2011; excluding ETFs
5.0 AMG Weekly Mutual Fund Flows, ex-ETFs ($ billions)
Domestic Equities, 4-week moving avg Total AMG Weekly Flows 1-Week Flow Inflow/(Outflow)
3.0 Assets 4-Week Avg This week % of Assets (Cons. Weeks)
All Equity 2,115 1.3 1.4 0.1 % 3
1.0 U.S. Equity 1,574 0.5 0.8 0.1 3
$ billions
Int'l Equity 437 0.7 0.3 0.1 32
(1.0)
Global 104 0.2 0.3 0.3 14
(3.0) Equity Income 83 0.4 0.3 0.3 33
Gold & Nat Res 50 0.2 0.2 0.4 11
(5.0) Money Market 2,348 0.8 7.9 0.3 3
All Taxable Bond 1,153 3.1 2.5 0.2 17
(7.0)
Govt Treas 24 0.0 0.1 0.2 1
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Source: Lipper and Goldman Sachs Global ECS Research. Source: Lipper and Goldman Sachs Global ECS Research.
Exhibit 36: Average daily TRADING TURNOVER over the last week Exhibit 37: Top ten S&P 500 STOCKS by daily average trading turnover
by sector, as of April 14, 2011 as of April 14, 2011
Materials Avg Daily 1-Week
1.3
Trading Total
Cons Discr 1.0
Company Ticker Sector Turnover (%) Return (%)
Info Tech 0.9
Netflix Inc. NFLX Consumer Discretionary 9.6 1
Utilities 0.8
United States Steel Corp. X Materials 7.6 (5)
S&P 500 0.8
Supervalu Inc. SVU Consumer Staples 7.5 17
Energy 0.7
AK Steel AKS Materials 6.9 (5)
Financials 0.7
Tenet Healthcare Corp. THC Health Care 6.6 (12)
Industrials 0.7 PPL Corp. PPL Utilities 5.9 4
Health Care 0.6 Expedia Inc. EXPE Consumer Discretionary 5.5 6
Telecom Services 0.5 National Semiconductor NSM Information Technology 5.3 0
Cons Staples 0.5 GameStop Corp. GME Consumer Discretionary 5.2 6
JDS Uniphase Corp JDSU Information Technology 4.8 (2)
0.0 1.0 2.0
% Daily Avg Trading Turnover S&P 500 Average 1.0 (1)
Daily average turnover = daily avg. trading value / avg. market cap (over the past 5 trading days).
Daily average turnover = daily avg. trading value / avg. market cap (over the past 5 trading days).
Source: Compustat, FactSet, and Goldman Sachs Global ECS Research. Source: Compustat, FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 17
April 15, 2011 United States
Correlation and Risk
Exhibit 38: S&P 500 stock and sector average correlation Exhibit 39: Credit Default Swaps, 5-Year On-the-run Spreads
as of April 14, 2011 as of April 14, 2011
1.0
300 1,800
0.9 Average sector correlation
1,600
0.8 250 CDX (HY) (rhs)
Investment Grade CDX (bps)
1,400
Average Correlation
0.7 0.68
High Yield CDX (bps)
1,200
200
0.6 1,000
0.5 150 800
0.4 600
0.33 100
0.3 400
0.2 200
50
CDX (IG) (lhs) 0
0.1
Average stock correlation
0.0 0 (200)
Dec-07
Jun-08
Aug-08
Dec-08
Jun-09
Aug-09
Dec-09
Jun-10
Aug-10
Dec-10
Jun-11
Oct-07
Feb-08
Apr-08
Oct-08
Feb-09
Apr-09
Oct-09
Feb-10
Apr-10
Oct-10
Feb-11
Apr-11
Dec-89
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Source: Goldman Sachs Global ECS Research. Source: Goldman Sachs Global ECS Research.
Exhibit 40: S&P 500 Cost of Equity = ERP + 10 Year Treasury Yield Exhibit 41: Risk Barometer and S&P 500 VIX Volatility Index, as of 14-Apr-11
as of April 14, 2011 Risk Barometer index is number of standard deviations from the average * 100
100 500
10.0
9.0 80 400
7.9 %
8.0 Risk Aversion
Cost of 60 Increasing S&P 500 VIX (LHS) 300
7.0 14-Apr-11
Equity
Risk Barometer
40 200
S&P 500 VIX
6.0
ERP
5.0 20 100
16
4.0 4.5 %
0 0
3.0 3.5 % (46)
(20) (100)
2.0 10 Year
Risk Aversion
US Treasury
1.0 Decreasing
Yield (40) (200)
0.0 Risk Barometer (RHS)
(60) (300)
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Jun-08
Jun-09
Jun-10
Jun-11
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
We estimate the equity risk premium (ERP) using our DDM framework to model expected future cash Note: Metrics included are implied option volatility (S&P 500 and NASDAQ 100), normalized skew, high
flows. We solve for the cost of equity that implies the market is at ‘fair value’ and then deduct the 10-year yield credit spreads, credit derivative swap spreads, mutual fund net flows, and cash levels.
US treasury.
Source: IDC via FactSet, and Goldman Sachs Global ECS Research. Source: IDC via FactSet, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 18
April 15, 2011 United States
Goldman Sachs Recommendations and Forecasts
(a)
Exhibit 42: Goldman Sachs Recommended Sector Weightings Exhibit 43: Goldman Sachs US Economics quarterly GDP forecasts
as of April 14, 2011 as of April 14, 2011
Sector Weightings
5.0 %
Total Goldman Sachs Current GS GS Goldman Sachs
4.5 %
Return Recommended S&P 500 Overweight / Alpha Economics
GDP Growth (qoq annualized %)
Sectors YTD Sector Weightings Weight Underweight YTD 4.0 %
Energy 13 % 13 % 200 bp 14 bp Consensus
Overweight 3.5 %
Information Technology 2 18 200 (5)
3.0 %
Financials 1 16 0 (5)
Consumer Discretionary 5 11 0 0 2.5 %
Industrials 7 Neutral 11 0 0 2.0 % 4.0 4.0 4.0 4.0
3.7 3.5 3.5 3.5
Materials 2 4 0 0 3.1
1.5 %
Telecom Services 5 3 0 0 2.6 2.5
1.0 %
Utilities 2 3 (100) 3 1.7
Underweight 0.5 %
Health Care 7 11 (100) (5)
Consumer Staples 5 11 (200) 0 0.0 %
Q1A Q2A Q3A Q4A Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E
S&P 500 5% 100 % 0 bp 2 bp
(a) Sector weightings last rebalanced on April 13, 2011. 2010 2011 2012
Source: FactSet and Goldman Sachs Global ECS Research. Source: Bloomberg and Goldman Sachs Global ECS Research.
Exhibit 44: Goldman Sachs 3-, 6-, and 12-month forecasts Exhibit 45: Goldman Sachs US Economics forecasts
as of April 14, 2011 as of April 14, 2011
Forecasts % Annual Change
units Current 3m 6m 12m 2010A 2011E 2012E
Equities Real GDP 2.9% 3.1% 3.8%
S&P 500 level 1315 1375 1425 1525
Consumer Spending 1.7 3.1 3.5
DJStoxx 600 level 277 300 320 340
Asia Pac Ex-Japan level 498 525 550 610 Total Fixed Investment 3.9 6.4 10.0
TOPIX level 847 850 900 1050 Business Fixed Investment 5.7 7.2 8.7
Ten Year Rates Residential Investment (3.0) 2.9 15.5
US % 3.5 3.5 3.8 4.0 Federal Government Spending 4.8 1.7 2.5
Euroland % 3.4 3.3 3.3 3.5 Exports of Goods and Services 11.7 9.4 7.8
Japan % 1.3 1.3 1.4 1.7 Imports of Goods and Services 12.6 6.5 9.2
Currencies Inflation
Euro / US Dollar EUR/$ 1.45 1.40 1.45 1.50
Sterling / US Dollar £/$ 1.64 1.67 1.73 1.79 Producer Price Index 4.2 5.0 1.3
US Dollar / Yen $/¥ 83.2 84.00 84.00 90.00 Headline CPI 1.7 2.5 1.6
Energy Core CPI 1.0 1.1 1.0
WTI Crude Oil $/bbl 108.70 99.50 100.50 103.50 Core PCE 1.3 0.8 0.8
NYMEX Nat. Gas $/mmBtu 4.21 3.75 400.00 4.25 Unemployment Rate 9.6 8.6 8.2
Metals Fed Funds Rate 0.2 0.2 0.2
London Gold $/troy oz 1472 1480 1565 1690 2-year Treasury Rate 0.6 1.0 2.0
LME Copper $/mt 9410 9300 9600 11000
10-year Treasury Rate 3.3 3.8 4.3
Source: FactSet and Goldman Sachs Global ECS Research. Source: Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 19
April 15, 2011 United States
Goldman Sachs Strategy Baskets
US Portfolio Strategy baskets are designed to provide portfolio managers with vehicles to monitor and implement thematic views in the U.S. equity markets. Our
baskets may be found on Bloomberg by typing <GSTH>. The Bloomberg page provides real-time basket performance and current basket constituents. To obtain
access to our baskets on Bloomberg, please contact your Goldman Sachs salesperson.
Exhibit 46: Strategy basket performance and average valuation data Exhibit 47: Strategy basket total return performance over the last week
as of April 14, 2011 last week % total return, as of April 14, 2011
Bloomberg Total Return % P/E P/B Div Yld Global Defensives <GSSBGDEF> 0.6
Ticker 1 wk 1 mo YTD NTM LTM (%) Domestic Defensives <GSSBDDEF> (0.3)
Strong B/S <GSTHSBAL> (0.6)
Macroeconomic Baskets
Low Op Leverage <GSTHOPLO> (0.6)
International Sales GSTHINTL (2)% 1% 6% 18x 5.0x 1.3 % Low HF Conc <GSTHHFSL> (1.0)
GARP <GSTHGARP> (1.0)
US Sales GSTHAINT (1) 2 7 18 3.0 1.7
ROE Growth <GSTHGROE> (1.1)
Western Europe Sales GSTHWEUR (2) 3 9 20 3.9 0.9 US Sales <GSTHAINT> (1.4)
BRICs Sales GSTHBRIC (2) 3 6 16 4.3 1.0 S&P 500 (1.4)
Dual Beta GSTHBETA (2) 1 8 19 3.2 0.6 Hedge Fund VIP <GSTHHVIP> (1.6)
High Op Leverage <GSTHOPHI> (1.8)
Fundamental Baskets Weak B/S <GSTHWBAL> (1.8)
Western Europe Sales <GSTHWEUR> (2.0)
ROE Growth GSTHGROE (1)% 4% 8% 17x 4.4x 1.4 % High HF Conc <GSTHHFHI> (2.0)
High Op Leverage GSTHOPHI (2) 4 8 17 3.0 1.2 Dividend Growth <GSTHDIVG> (2.0)
Low Op Leverage GSTHOPLO (1) 1 6 17 4.9 1.4 BRIC Sales <GSTHBRIC> (2.0)
Int'l Sales <GSTHINTL> (2.1)
Strong Balance Sheet GSTHSBAL (1) 3 6 19 5.9 0.9
Dual Beta <GSTHBETA> (2.4)
Weak Balance Sheet GSTHWBAL (2) 3 8 17 2.9 1.8 Domestic Cyclicals <GSSBDCYC> (2.4)
Global Cyclicals <GSSBGCYC> (2.6)
Uses of Cash Baskets
High Sharpe Ratio <GSTHSHRP> (2.6)
Dividend Growth GSTHDIVG (2)% 3% 8% 13x 3.6x 2.7 %
(3) (2) (1) 0 1
Hedge Fund Baskets
Source: FactSet and Goldman Sachs Global ECS Research.
High HF Concentration GSTHHFHI (2)% 3% 10 % 18x 3.4x 0.3 %
Low HF Concentration GSTHHFSL (1) 1 3 17 3.8 2.7 Exhibit 48: US Portfolio Strategy thematic trade recommendations
Hedge Fund VIP GSTHHVIP (2) 3 5 17 5.0 1.0 as of April 14, 2011
Valuation Baskets Thematic Trade Recommendations
Initiation Weekly
GARP GSTHGARP (1)% 2% 6% 16x 4.8x 0.8 %
Date Return Return
High Sharpe Ratio GSTHSHRP (3) 1 8 13 2.6 1.5
BUY BRIC Sales Basket (GSTHBRIC); SELL S&P 500
Sector Baskets See Portfolio Passport: US Stocks for a Growth Market World (12-Apr-11) 12-Apr-11 (0.0)% -
Global Cyclicals GSSBGCYC (3)% 1% 7% 17x 3.9x 1.2 % BUY ROE Growth Basket (GSTHGROE); SELL S&P 500
See 2011 Outlook: Easy Money, Hard Market (1-Dec-10) 1-Dec-10 1.7 % 0.3 %
Global Defensives GSSBGDEF 1 4 4 17 5.8 1.6
BUY Cyclicals Basket; SELL Defensives Basket
Domestic Cyclicals GSSBDCYC (2) (1) 4 15 2.6 1.7
See 2011 Outlook: Easy Money, Hard Market (1-Dec-10) 1-Dec-10 3.7 % (2.7)%
Domestic Defensives GSSBDDEF (0) 4 5 16 2.9 2.3
BUY High Sharpe Ratio Basket (GSTHSHRP); SELL S&P 500
S&P 500 (1)% 2% 5% 13x 2.4x 1.9 % See 2010 Outlook: Cyclical start; defensive finish (7-Dec-09). 7-Dec-09 20.8 % (1.2)%
S&P 500 Average 16 3.9 1.7
Results presented should not and cannot be viewed as an indicator of future performance. Further details
S&P 500 Median 15 2.7 1.5 on performance calculations can be provided upon request.
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 20
April 15, 2011 United States
Constituents of the BRICs Sales Basket <GSTHBRIC>
Exhibit 49: BRICs Sales Basket, as of April 14, 2011
Explicit Explicit
BRICs BRICs
Sales Asia South Eastern Country Sales Asia South Eastern Country
Company Ticker Rating Non-US BRICs ex. Japan America Europe Exposure Company Ticker Rating Non-US BRICs ex. Japan America Europe Exposure
Information Technology Consumer Staples
Broadcom Corporation BRCM Buy* 97 % 93 % 93 % 0% 0% 56 % Central European Distribution CEDC NC 100 % 92 % 0% 0% 92 % 58 %
Genpact Ltd. G Neutral 92 81 81 0 0 73 Avon Products AVP Sell 84 59 2 42 15 22
Skyworks Solutions Inc. SWKS NC 89 77 77 0 0 59 Bunge Ltd. BG NC 77 40 13 26 0 20
Applied Materials AMAT Buy 88 70 70 0 0 16 Philip Morris Intl PM Buy* 100 29 29 0 0 NA
QUALCOMM Inc. QCOM Buy* 95 68 68 0 0 30 Colgate-Palmolive CL Neutral 77 27 0 27 0 NA
Novellus Systems NVLS Neutral 76 63 63 0 0 40
Varian Semiconductor Equip. VSEA Buy 85 62 62 0 0 NA Basket median 84 % 40 % 2% 26 % 0%
Texas Instruments TXN Not Rated 88 62 62 0 0 3 Sector median 24 0 0 0 0
KLA-Tencor Corp. KLAC Neutral 81 62 62 0 0 NA
Consumer Discretionary
Basket median 88 % 68 % 68 % 0% 0% Central European Media Ent. CETV Neutral 100 % 100 % 0% 0% 100 % NA
Sector median 52 0 0 0 0 Las Vegas Sands Corp. LVS Neutral 78 78 78 0 0 60
Wynn Resorts WYNN Neutral 69 69 69 0 0 69
Financials Yum! Brands, Inc YUM Neutral 64 36 36 0 0 36
Citigroup Inc. C Neutral 46 % 32 % 17 % 15 % 0% NA Whirlpool Corp. WHR Buy 56 30 5 25 0 18
Morgan Stanley MS Neutral 31 14 14 0 0 NA
White Mountains Insurance WTM NC 54 9 9 0 0 NA Basket median 69 % 69 % 36 % 0% 0%
MBIA Inc. MBI NC 22 7 1 6 0 NA Sector median 22 0 0 0 0
Weyerhaeuser Corp. WY Neutral 32 7 5 1 0 5
ACE Limited ACE NC 39 6 0 6 0 NA Materials
Bank of America Corp. BAC Buy 21 6 6 0 0 NA Schnitzer Steel Industries Inc. SCHN Neutral 69 % 53 % 53 % 0% 0% NA
Greenhill & Co. GHL Sell 38 4 4 0 0 NA Newmont Mining Corp. NEM NC 78 44 26 19 0 NA
Basket median 35 % 7% 5% 1% 0% Basket median 73 % 49 % 40 % 9% 0%
Sector median 5 0 0 0 0 Sector median 49 8 0 0 0
Energy Telecommunication Services
Diamond Offshore Drilling DO Buy* 81 % 49 % 9% 39 % 0% 37 % NII Holdings Inc. NIHD Buy 100 % 62 % 0% 62 % 0% 46 %
Schlumberger Ltd. SLB Buy 76 37 21 16 0 NA
Atwood Oceanics Inc. ATW Neutral 98 29 29 0 0 NA Basket median 100 % 62 % 0% 62 % 0%
National Oilwell Varco NOV Neutral 66 26 26 0 0 NA Sector median 0 0 0 0 0
Newfield Exploration Co. NFX Buy 24 24 24 0 0 3
Noble Corp. NE Buy 80 24 5 19 0 23 Utilities
McDermott International Inc. MDR NC 95 21 19 2 0 3 AES Corp. AES NC 84 % 69 % 1% 63 % 5% 39 %
Basket median 80 % 26 % 21 % 2% 0% Basket median 84 % 69 % 1% 63 % 5%
Sector median 24 0 0 0 0 Sector median 0 0 0 0 0
Industrials
Copa Holdings S.A. (Cl A) CPA NC 86 % 71 % 0% 71 % 0% NA
Expeditors Int'l EXPD NC 77 38 37 1 0 37
Avery Dennison Corp. AVY NC 68 31 23 7 0 NA
AGCO Corp. AGCO Neutral 83 30 2 28 0 NA
Emerson Electric EMR Buy 57 28 23 5 0 13
Cummins Inc. CMI Buy* 64 23 15 8 0 23
Basket median 72 % 30 % 19 % 8% 0%
Sector median 31 0 0 0 0
Health Care
Waters Corporation WAT Buy 70 % 21 % 21 % 0% 0% NA
Pfizer, Inc. PFE Buy 57 18 0 0 0 NA
Mettler-Toledo International MTD Neutral 71 15 15 0 0 15
Mylan Laboratories MYL Buy* 51 14 14 0 0 NA
Agilent Technologies A Neutral 68 14 14 0 0 14
BioMarin Pharmaceutical Inc. BMRN NC 47 11 0 11 0 NA
Basket median 62 % 15 % 14 % 0% 0% GSTHBRIC median 76 % 31 % 16 % 0% 0%
Sector median 35 0 0 0 0 S&P 500 median 28 0 0 0 0
Source: Company filings, Worldscope, Compustat, and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 21
April 15, 2011 United States
Recent US Portfolio Strategy Publications
Please contact your Goldman Sachs salesperson for access to additional research or if you wish to be added to the US Portfolio
Strategy research distribution list.
Exhibit 50: Recent research from US Portfolio Strategy
Latest Market Research Publication Date
US Sector Views: Shift sector weights closer to benchmark on balanced risk-reward April 14, 2011
US Equity Views: New 3-, 6-, and 12-month targets reflect 5%, 8% and 16% returns April 13, 2011
US Thematic Views: GARP Update April 1, 2011
US Equity Views: 4Q earnings season preview: We expect margins will hit a new high January 18, 2011
US Equity Views: Raising EPS forecasts again; 19% return to our new target of 1500 January 7, 2011
US Portfolio Strategy 2011 Outlook: Easy money, hard market December 1, 2010
Recent US Weekly Kickstart: "Conversations we are having with clients" Publication Date
The great margin mathematics debate and 1Q earnings season calendar April 8, 2011
S&P 500 rises 5% in Q1 and investors’ focus shifts to the impact of higher interest rates April 1, 2011
We remain positive growth-sensitive US equities ahead of key macro data period March 25, 2011
Japan impact on equities and economic growth; US Financials “2nd stress test" March 18, 2011
Improving equity fundamentals vs. oil price shock fears March 11, 2011
S&P 500 returns during oil price shocks since 1970 suggest share prices likely to rise further March 4, 2011
Franchise Research Publication Date
Portfolio Passport: US stocks for a growth market world April 12, 2011
Global Dividend Swap Monitor: Assessing risks and entry opportunities for global dividend swaps March 21, 2011
Portfolio Strategy: GOAL: Global Opportunity Asset Locator April 15, 2011
Portfolio Strategy: The anatomy of ROE: Part 2: S&P 500 Sectors November 11, 2010
Portfolio Strategy: The anatomy of ROE: Part 1: S&P 500 July 22, 2010
Portfolio Strategy: Revisiting our BRICs Nifty 50 baskets May 7, 2010
Periodical Research Description Frequency Timing / Recent Release
Hedge Fund Trend Monitor Analysis of hedge fund holdings and positioning Quarterly February 18, 2011
S&P 500 Beige Book Qualitative assessment of S&P 500 quarterly earnings reports Quarterly February 3, 2011
Strategy Baskets Overview of US Portfolio Strategy thematic baskets Quarterly December 21, 2010
US Monthly Chartbook Monthly report on where to invest in the S&P 500 Monthly April 4, 2011
US Weekly Kickstart Five minute guide to the US equity market Weekly Friday PM
Where to Invest Now Marketing presentation highlighting recent research and best trade ideas Monthly March 8, 2011
Source: Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 22
April 15, 2011 United States
Equity basket disclosure
The Equities Division of the firm has previously introduced the basket of securities discussed in this report. The Equity Analyst may
have been consulted as to the composition of the basket prior to its launch. However, the views expressed in this research and its
timing were not shared with the Equities Division.
Rating and pricing information
Agilent Technologies (N/N, $46.63), ALCOA (N/N, $16.55), Apple Inc. (B/N, $332.42), Abbott Laboratories (N/N, $51.00), American
Electric Power (N/C, $35.17), AGCO Corp. (N/N, $51.43), (AK Steel Holding (S/N, $15.44), Applied Materials, Inc. (B/N, $14.78),
Advanced Micro Devices, Inc. (S/N, $8.19), Amgen Inc. (S/C, $54.83), AutoNation, Inc. (S/A, $32.36), Anadarko Petroleum Corp. (N/A,
$79.38), Air Products & Chemicals Inc. (N/A, $90.57), Amphenol Corp. (N/A, $52.45), Apollo Group Inc. (B/N, $39.96), Atwood
Oceanics, Inc. (N/A, $42.62), Avon Products, Inc. (S/N, $28.21), Bank of America Corporation (B/A, $13.13), Baxter International, Inc.
(B/N, $53.77), BB&T Corp. (S/N, $26.46), C.R. Bard Inc. (N/N, $101.24), Biogen Idec, Inc. (S/C, $82.19), Bank of New York Mellon Corp.
(N/N, $29.79), BlackRock, Inc. (N/N, $193.38), Ball Corporation (N/N, $36.44), Broadcom Corporation (B/N, $38.15), Boston Scientific
Corp. (S/N, $7.13), Peabody Energy Corp. (N/N, $65.76), Citigroup Inc. (N/A, $4.43), Chubb Corp. (B/N, $61.69), CB Richard Ellis Group
Inc. (N/N, $28.26), Central European Distribution Corporation (B/N, $10.39), Central European Media Enterprises (N/A, $21.23), CF
Industries Holdings, Inc. (S/N, $133.69), Colgate-Palmolive Company (N/N, $81.84), Comerica, Inc. (N/N, $38.02), Cummins Inc. (B/N,
$105.32), Cabot Oil & Gas Corp. (B/A, $52.56), Coach, Inc. (N/N, $54.42), Rockwell Collins Corp. (N/A, $62.14), ConocoPhillips (N/A,
$78.28), Covidien plc (B/N, $52.80), CSX Corporation (B/N, $76.11), CenturyLink Inc. (B/N, $40.00), Chevron Corp. (N/A, $104.88), E.I.
duPont de Nemours (NR, $54.11), Dean Foods Company, (N/A, $9.88), Quest Diagnostics Incorporated (S/N, $57.76), Danaher Corp.
(NR, $51.92), Diamond Offshore Drilling (B/A, $75.69), Dover Corp. (B/A, $64.35), The Estee Lauder Companies Inc. (N/N, $94.95),
EMC Corporation (B/N, $26.63), Emerson Electric Co. (B/A, $57.41), El Paso Corp. (N/N, $18.26), Express Scripts, Inc. (N/A, $55.10),
E*TRADE Financial Corp. (N/N, $15.67), Eaton Corp. (B/A, $52.37), Edwards Lifesciences Corp. (N/N, $83.90), Expedia Inc. (N/N,
$23.65), Freeport-McMoRan Copper & Gold (B/N, $51.93), F5 Networks, Inc. (S/N, $96.17), First Horizon National Corp. (N/N, $10.90),
Fifth Third Bancorp (N/N, $13.65), Fluor Corp. (N/A, $66.82), Forest Laboratories, Inc. (N/N, $33.75), Genpact Ltd. (N/A, $15.60),
General Electric Co. (B/A, $20.00), Greenhill & Co., Inc. (S/N, $59.67), Gilead Sciences Inc. (N/C, $41.85), GameStop Corp. (N/N,
$25.41), Goodrich Corp. (N/A, $84.36, W.W. Grainger Inc. (N/A, $142.24), Halliburton Company (B/A, $46.14), Huntington Bancshares
Inc. (B/N, $6.50), Hess Corp. (N/A, $79.65), The Hartford Financial Services (N/A, $26.39), Harley-Davidson), Inc. (N/A, $40.47),
Honeywell International Inc. (N/A, $57.50), International Business Machines (N/N, $164.97), International Game Technology (S/C,
$15.57), Intel Corp. (N/N, $19.58), Ingersoll-Rand PLC (N/A, $46.72), Intuitive Surgical, Inc. (S/N, $363.32), Johnson & Johnson (N/N,
$60.02), Juniper Networks, Inc. (B/N, $38.49), Janus Capital Group Inc. (N/N, $12.07), KeyCorp (N/N, $8.75), KLA-Tencor (N/N, $42.48),
Lennar Corp. (N/N, $18.15), Laboratory Corporation of America Holdings (N/N, $95.06), L-3 Communications Holdings Inc. (S/C,
$75.43), Linear Technology Corp. (N/N, $32.87), Eli Lilly & Company (S/N, $35.75), Lorillard, Inc. (B/N, $100.38), Limited Brands, Inc.
(S/N, $37.67), Las Vegas Sands Corp. (N/N, $44.60), Lexmark International Group (N/N, $35.65), Marriott International (N/A, $34.06),
McDonald's Corp. (N/A, $77.07), Massey Energy Co. (N/N, $63.00), Motorola Mobility Holdings Inc. (B/N, $23.22), Altria Group, Inc.
(N/N, $26.89), Morgan Stanley & Co. (N/A, $26.79), Mettler-Toledo International Inc. (N/N, $169.81), Murphy Oil Corp. (N/A, $73.67),
Mylan Inc. (B/N, $23.17), NASDAQ OMX Group Inc. (NR, $27.81), Noble Corporation (B/A, $42.73), Netflix), Inc. (B/A, $236.73),
Newfield Exploration (B/A, $70.18), NII Holdings (B/N, $38.73), National Oilwell Varco (N/A, $76.00), National Semiconductor Corp.
(NR, $24.11), NetApp, Inc. (N/N, $48.42), Northern Trust Corp. (N/N, $51.63), Nucor Corp. (N/N, $44.97), Nvidia Corp. (N/N, $18.51),
Goldman Sachs Global Economics, Commodities and Strategy Research 23
April 15, 2011 United States
Novellus Systems Inc. (N/N, $33.87), Omnicom Group Inc. (N/A, $48.02), Paccar Inc. (N/N, $50.00), Pfizer Inc. (B/N $20.49), ProLogis
(S/N, $15.89), Philip Morris International Inc. (B/N, $66.19), PNC Financial Services (N/A, $61.87), PPG Industries, Inc. (B/A, $92.49),
PPL Corporation (B/C, $26.75), Quanta Services, Inc. (N/A, $20.93), QUALCOMM, Inc. (B/N, $52.60), Reynolds American Inc. (S/N,
$36.43), Regions Financial Corp. (N/N, $7.24), Sprint Nextel Corp. (N/N, $4.96), Schnitzer Steel Industries (N/N, $59.94), Sherwin-
Williams Company (N/A, $84.30), Schlumberger, Ltd. (B/A, $86.02), SunTrust Banks, Inc. (N/N, $28.19), St. Jude Medical, Inc. (N/N,
$52.20), State Street Corp. (B/N, $45.15), Stryker Corp. (N/N, $59.87), AT&T Inc. (N/N, $30.29), Teradyne, Inc. (B/N, $16.88), Tenet
Healthcare Corp. (NR, $6.60), T. Rowe Price Group, Inc. (B/N, $66.56), The Travelers Companies), Inc. (S/N, $59.63), Tesoro Corp.
(N/N, $26.13), Texas Instruments Inc. (NR, $34.71), Textron Inc. (B/A, $26.27), Tyco International Ltd. (N/A, $51.94), UnitedHealth
Group (N/A, $44.82), Union Pacific Corporation (N/N, $97.39), U.S. Bancorp (N/A, $25.84), United Technologies Corp. (B/A, $83.98),
Valero Energy Corp. (S/N, $27.60), Vulcan Materials Company (S/N, $43.45), Varian Semi Equipment Assoc. (B/N, $43.39), Verizon
Communications (B/N, $37.71), Waters Corporation (B/N, $87.20), Western Digital Corp. (NR, $38.38), Wells Fargo & Company (B/A,
$30.15), Whirlpool Corporation (B/N, $84.74), Weyerhaeuser Co. (N/N, $22.49), Wynn Resorts, Limited (N/N, $134.96), U.S. Steel
Group (B/N, $50.85), XL Group Plc (B/N, $24.37), Xerox Corp. (N/N, $10.75), Yahoo! Inc. (N/A, $16.69), Yum! Brands, Inc. (N/A, $50.68),
Zions Bancorporation (N/N, $23.44).
Goldman Sachs Global Economics, Commodities and Strategy Research 24
April 15, 2011 United States
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