Tuesday, December 18, 2007

A Masochistic Market Sells Goldman's Great Quarter

Goldman Sachs (GS) had it usual fantastic quarter and appears to be the only financial institution that will walk unscathed through the credit crisis, and shares fall.

Goldman announced:
* They will repurchase over 15% of outstanding shares
* Announced CDO exposure of only $400 million
* Investment banking revenues jumped 47% from last year to $1.97 billion,
* Q4 net earnings of $3.166 billion or $7.01 per share vs $6.59 last year.
* Earned $24.73 a share on revenue of $11.407 billion, a 26% increase in 2007.

What did the market seize on today? David Viniar, its chief financial officer said "The markets are pretty dislocated. In the near term we are more cautious, not pessimistic, just cautious."

And for that, $4.4 billion was shaved off Goldman's market cap at one point today. Let's not forget that Goldman trades at a scorching PE of 7 times trailing earnings. I would say the market not only has "pessimistic" baked into the price, they have "disastrous" factored in it.

It is ok, Goldman at or under $200 is a screaming buy and those of us who can see through the fear are getting this institution at dollar store prices. This is how negative the markets are on anything financial, even good news is sold.

As earnings news come out from the other financials over the next few weeks like Merrill (MER) and Lehman (LEH), people will actually realize just how good this quarter was.

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