The relationship between politicians and stock markets has been historically fraught, to say the least. Despite heavy scrutiny and occasional controversies, politicians on both sides of the aisle continue to invest heavily (and sometimes quite actively) in various companies' stocks over the years - so much so that there are specialized ETFs designed to track their trades, so that everyday market participants can buy them and follow along.
One of these is the Unusual Whales Subversive Republican Trades ETF (KRUZ), which invests in stocks purchased or sold by Republican members of Congress. KRUZ is up 5% on a YTD basis, compared to 6.5% for the broader S&P 500 Index ($SPX).
Top holdings of the KRUZ ETF include JPMorgan Chase (JPM) (4.79% of net assets), heating, ventilation and air conditioning company Comfort Systems USA (FIX) (2.53% of net assets), and chip makers Nvidia (NVDA) (2.08% of net assets) and Intel (INTC) (1.59% of net assets).
Notably, the politician who inspired that ETF's ticker symbol recently grabbed headlines for a massive sale of stock in JPM's rival, Goldman Sachs (GS) - Senator Rafael Edward Cruz (R-TX), more popularly known as Ted.
Cruz's Biggest GS Stock Sale Yet
On April 15, Cruz sold 935 shares of Goldman Sachs for a total value of $375,000. The shares were sold on behalf of his spouse, Heidi - a managing director at Goldman since 2012. This latest transaction was by far the largest GS stock sale in Cruz's public trading history.
The senator from Texas has been on record as a semi-regular seller of GS stock since he came into office, and was previously fined by election regulators for failing to properly disclose a loan from the investment bank.
Given that managing directors at Goldman, like Heidi Cruz, are known to sometimes be compensated in part via equity, it's entirely possible that this latest trade by the senator amounts to nothing more than some very high-level family bookkeeping.
So, what do average investors need to know about Goldman shares right now? Let's take a closer look.
GS Stock Outperforms
Overall, GS stock is up 10.7% on a YTD basis. Commanding a market cap of $139.8 billion, the New York-based investment bank also offers a dividend yield of 2.51%. The dividend yield is above the sector median of 2.114%. Goldman has been raising dividends for the past 12 years - and with a payout ratio of about 42%, there's scope for further growth.
Goldman Beats on Earnings
A key driver of Goldman's share price rally since April 15 was its impressive Q1 earnings, as revenue and earnings both surpassed estimates. Net revenues for Q1 came in at $14.21 billion, up 16% from the previous year. Growth in all major segments, especially core Global Banking and Markets ($9.73 billion, up 15% YoY) and Asset and Wealth Management ($3.79 billion, up 18% YoY) propped up the bank's overall revenues during the quarter.
EPS jumped even more sharply, up 32% to $11.58, comfortably outpacing the consensus estimate of $8.73. Notably, Goldman's EPS have surpassed Street estimates in four out of the past five quarters.
Further, over the past 10 years, net revenue and EPS have grown at a CAGR of 3.4% and 5.34%, respectively.
Goldman closed the first quarter with a cash balance of $209 billion. Loans and deposits both increased from the start of the year to $184 billion (vs. $183 billion on Dec. 31) and $441 billion (vs. $428 billion on Dec. 31), respectively.
Macro Tailwinds
The two core areas where Goldman Sachs occupies strong market positions are widely expected to witness growth in the upcoming years.
Revenues in the global investment banking market are expected to rise to $370 billion by 2028 from about $330 billion in 2023, and Goldman Sachs is the second largest player in this market with a share of 6.7%.
Meanwhile, the addressable market for wealth management is forecast to reach $158.7 trillion by 2028 from $120.96 trillion in 2023.
Further, the company has plans to grow its presence in the burgeoning private credit segment with plans to increase its assets in this space from $130 billion to $300 billion over the next five years. To that end, Goldman's asset management arm bought a 20% stake in private credit specialist Kennedy Lewis Investment Management, valuing the firm at over a billion dollars.
Analysts Say Goldman's a Strong Buy
Investors might be relieved to know that GS did not appear on Goldman's own list of stocks that are among the most sensitive to Fed rate policy.
With the central bank's latest comments on interest rates due out this Wednesday afternoon, Goldman Sachs analysts wrote, "Stocks can continue to rally if higher-for-longer interest rates are driven by resilient economic growth as opposed to hawkish policy."
Analysts are expecting Goldman Sachs to continue to report solid earnings growth. Looking ahead, the consensus is calling for a 56.8% EPS increase this fiscal year, followed by 8.1% bottom-line growth in FY 2025.
The Wall Street community has also earmarked a rating of “Strong Buy” for GS stock, with a mean target price of $435.67. This denotes an upside potential of roughly 1.7% from current levels. However, the Street-high target price of $493 implies upside potential of 15% from current levels.
Out of 22 analysts covering GS stock, 16 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating and 5 have a “Hold” rating.
