My favorite financial stock has been Goldman Sachs for the last year. I find many of their calls to be incredibly accurate and their analysts to possess foresight unparalleled in the industry. Let's not forget to mention their excellent risk management, the fact that they were short subprime mortgages, and that they continue to earn billions while most of their competitors are losing them.
This firm is reporting earnings on the 16th and the stock has been suffering the ill effects of multiple earnings estimate cuts in recent weeks. This is not surprising. It should be noted that Goldman likes to manage expectations, as the market has grown used to them blowing estimates out of the water, so they feel the need to continue to do so. I remember in December, they beat earnings by 10% and the stock dove because that "was not enough" as one professional I spoke with put it. So looking forward to this quarter's earnings, when the recent cuts in expectations are taken into consideration, I would like to see Goldman beat by at least 20%. If they fail to do this, I will consider it as bad news for the financial sector in the medium term. If Goldman manages to post huge numbers, I do not necessarily feel that it will invigorate the financial sector, although I don't deny that it may cause a short term pop. Either way I will still endorse Goldman as a buy for the next 3-5 years.
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