1. December 9, 2011
United States
US Weekly Kickstart
Portfolio Strategy Research
Client response to our 2012 US equity outlook
We met with a range of investors this week to discuss our outlook for US equities in the coming year. We expect sub-trend economic
growth, 3% growth in S&P 500 earnings (to $100), and flat valuation, leading to a year-end 2012 target of 1250. Most clients agreed
with our view, with pushback focused on margins and Europe. Bullish investors believe margins will grow from the current record
levels and boost earnings. Others expect resolution in Europe will buoy investor confidence and that the S&P 500 could reach 1400.
A small number of investors expect a collapse of the euro; we estimate the market could trade down to 900 in this scenario.
Performance Sector views and performance
David J. Kostin
The S&P 500 fell 0.8% this week. Financials was Our recommended sector weightings gained 3 bp
(212) 902-6781 david.kostin@gs.com
the best-performing sector (+0.8%) while Energy this week, and have generated -41 bp of alpha Goldman, Sachs & Co.
was the worst-performing sector (-2.1%). We YTD.
expect the S&P 500 will trade at 1150 in three Stuart Kaiser, CFA
months (-7%) and 1250 in 12 months (+1%). (212) 357-6308 stuart.kaiser@gs.com
US Portfolio Strategy Baskets
Goldman, Sachs & Co.
Our recommended trades vs. the SPX: High
S&P 500 Earnings Sharpe Ratio <GSTHSHRP> was up 0.2%, High Amanda Sneider, CFA
Our top-down EPS forecasts of $100 and $106 for Quality <GSTHQUAL> was down 0.5%, with (212) 357-9860 amanda.sneider@gs.com
2012 and 2013 reflect +3% and +7% growth, Defensives <GSSBDEFS> and Dividend Growth Goldman, Sachs & Co.
respectively. Bottom-up consensus forecasts a <GSTHDIVG> trading flat.
Peter Lewis
10% increase in 2012 to $108, and a 10% increase (212) 902-9693 peter.lewis@gs.com
Domestic Sales <GSTHAINT> vs. International
in 2013 to $119. Goldman, Sachs & Co.
Sales <GSTHINTL> was up 0.3%.
Valuation Ben Snider
S&P 500 stock performance this week (212) 357-1744 ben.snider@gs.com
Top-down, S&P 500 trades at an NTM P/E of Goldman, Sachs & Co.
Leaders: GCI, MS, WDC, JPM, and DF.
12.5X. Bottom-up, it trades at an NTM P/E of 11.8X
Laggards: BHI, TSO, JNPR, BSX, and NFX.
and an LTM P/B of 2.1X.
Note: The ability to trade these baskets will depend upon market
conditions, including liquidity and borrow constraints at the time
of trade.
Goldman Sachs 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 and other important disclosures, see the Disclosure Appendix, 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
2. December 9, 2011 United States
Conversations we are having with clients: Client response to our 2012 US equity outlook
This week we met with a wide range of investors to discuss the outlook recapitalization of European banks, and clarity in the region’s future will
for US equities in 2012. Roughly two thirds of the clients we met with cause a surge in investor confidence. Investors commonly quote 1400 as a
agree with our base case view that the S&P 500 will deliver lackluster target S&P 500 price level in this “risk-on” scenario of multiple-expansion.
returns next year. Among those that do not, Europe is the key factor with
The divergence between this view and our own is the path to resolution.
bulls outnumbering bears. Investors with global or cross-asset mandates
Bulls expect clarity in the near term that will reassure investors. We expect
broadly see US equities as attractive in relative terms. Our outlook is based
the situation to worsen before it gets better with market pressure necessary
on three central points:
for progress. Our global equity forecasts point to 3- and 6-month downside
1. Stagnant economy. Our US economics team expects a fifth straight year in Europe, Asia and the US before recovery in 2H 2012. Clients with global or
of sub-trend economic growth with 1.6% GDP growth forecast in 2012 and cross-asset mandates broadly see equities as attractive relative to low bond
the environment persisting in 2013 with 2.2%. They expect unemployment yields and the US as appealing globally due to recent growth momentum.
to remain elevated at 9%, fiscal drag from a divided Congress, and
EU Summit demonstrates progress but lacked “regime change.”
restrained capex in the face of political and economic uncertainty.
Overall, policymakers are making progress and signaled a commitment to
2. Modest earnings growth. We expect margins to peak in 2011 and fall address the twin sovereign and banking system crises. However, lack of
slightly in 2012. Combined with weak sales growth, this means S&P 500 clarity on the IMF’s role and no clear change in the ECB’s activities in
earnings should grow only 3% to $100 in 2012. Consensus expects $108. sovereign debt markets will likely leave some investors disappointed.
3. Stable valuation. P/E multiples tended to remain flat during 17 Others who disagree with our forecast argue that margins will continue
“stagnation” periods of prolonged weak but positive economic growth in to expand as sales grow, even in a sub-trend economic environment.
OECD countries since 1980. A flat P/E of roughly 12x is supported by our However, history shows that margins don’t always expand when sales grow.
dividend discount model and uncertainty-based P/E model, although other During the last 40 years S&P 500 margins have hit cycle peaks and
approaches such as the Fed model and the historical ROE vs. price/book contracted six times, and in each period sales continued to grow. Rather,
relationship suggest significant upside to fair value. Flat valuation along margins tend to contract in periods of positive but decelerating sales growth.
with modest earnings growth translates into our S&P 500 year-end We expect significantly slower sales growth in 2012 than the 11% rate in
2012 target of 1250, roughly unchanged from the current level. 2011, as does consensus.
For clients who agree with our outlook, we recommend three strategies Margins are the key difference between our earnings forecast and the
involving our thematic baskets. Buy: (1) High Quality Stocks (Bloomberg consensus view for 2012. We have similar expectations for sales growth in
ticker: <GSTHQUAL>) with safe balance sheets and a history of stable 2012 at 3.7% vs. 5.1% for consensus (ex-Financials and Utilities). However,
growth; (2) Dividend Growth and Yield (<GSTHDIVG>) as investors navigate we expect margins to contract to 8.7% in 2012 from 8.9% in 2011 while
an environment of weak price returns and low yields; (3) stocks with high US consensus expects them to grow to 9.4%. Each 50 bp shift in margins equals
sales exposure vs. firms with high international revenues (<GSTHAINT> vs. about $4 in S&P 500 EPS. The 70 bp gap between our margin forecast and
<GSTHINTL>). These strategies have generally outperformed in 2011 and consensus explains 75% of the $8 difference in 2012 EPS estimates.
should continue to work in 2012 given our outlook. Stocks that appear in at
Fear of euro collapse frames more bearish views. A small minority of
least two of these baskets include ACN, OXY, WAG, CTL, JPM, and WFC.
investors expects a euro breakup and a deep recession in Europe. In this
Bullish investors hold more positive outlooks for margins and Europe, case our uncertainty-based P/E model suggests the S&P 500 could fall by
and argue that our target is too low. Some investors generally agree with roughly 25% to 900. Even if collapse is avoided, the continuation of “passive
our muted outlook for the economy and corporate earnings, but feel that an containment” and delay of resolution continues to raise the costs in both
agreement to end Europe’s debt crisis will inevitably be reached next year. financial and economic terms, creating a poor condition for equity markets.
They argue that the stabilization of sovereign balance sheets,
Goldman Sachs Global Economics, Commodities and Strategy Research 2
3. The charts we are watching: Our 2012 US equity outlook
Exhibit 1: S&P 500 sales, margins and EPS forecasts vs. consensus Exhibit 2: Uncertainty-based P/E model points to possible downside
as of December 8, 2011 as of November 25, 2011
Top-down Bottom-Up 24
GS Forecast Consensus
22
2011E 2012E 2013E 2011E 2012E 2013E
S&P 500 forward P/E estimate
S&P 500 ex-Financials and Utilities
20
Sales Per Share $873 $905 $949 $871 $915 $961
Y/Y growth 11.2 % 3.7 % 4.9 % 11.0 % 5.1 % 5.0 % 18
Y/Y growth ex- Energy 8.0 2.3 4.3 8.3 4.9 4.8
16
Profit Margin 8.9% 8.7% 8.9% 9.0% 9.4% 10.0%
14
EPS $78 $79 $84 $79 $86 $96
Y/Y growth 16.6% 1.2% 6.9% 17.4% 9.8% 11.6% 12 12.0X
95% confidence range 10.1X
Utilities EPS $3 $3 $3 $3 $3 $3 10
Financials EPS 16 17 18 16 18 19 Predicted P/E
8.2X
8
S&P 500 EPS $97 $100 $106 $98 $108 $119
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Y/Y growth 15.9% 2.7% 6.6% 16.5% 10.4% 10.5%
Source: Compustat, FirstCall, I/B/E/S, and Goldman Sachs Global ECS Research. Source: Goldman Sachs Global ECS Research.
Exhibit 3: Margins often contract when sales growth is positive but slowing Exhibit 4: Each 50 bp shift in margins equals roughly $4 in 2012 S&P 500 EPS
as of December 8, 2011 as of December 8, 2011
40 Sensitivity of 2012 EPS forecast to
S&P 500 (Ex-Financials & Utilities)
30 sales growth and margin
Sales
20 growth 2012 Profit Margin
7.7 % 8.2 % 8.7 % 9.2 % 9.7 %
Y/Y Change (%)
10
0 5.7 % 92 97 101 106 111
2012 Sales Growth
(10) 4.7 91 96 101 105 110
Margin
(20) growth 3.7 91 95 100 104 109
(30)
Margins fall while sales 2.7 90 95 99 103 108
growth remains positive
(40)
1.7 89 94 98 103 107
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Source: Compustat and Goldman Sachs Global ECS Research. Source: Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 3
4. December 9, 2011 United States
S&P 500 Performance
Exhibit 5: S&P 500 sector performance over the last week Exhibit 6: S&P 500 price return and daily trading volume
as of December 8, 2011 as of December 8, 2011
1,400 7
Financials 0.8
S&P 500 daily price level (lhs)
Cons Discretionary (0.1) 1,300 6
Shares traded (billions)
Information Tech (0.4)
S&P 500 Price Level
5
Telecom Services (0.4) 1,200
4
Consumer Staples (0.4) S&P 500
1,100 200-day moving average
S&P 500 (0.8) 3
Industrials (1.3) 1,000
2
Utilities (1.6)
900 S&P 500 daily trading volume (rhs) 1
Health Care (1.7)
Materials (1.9) 800 0
8-Dec-09
8-Sep-10
8-Dec-10
8-Sep-11
8-Dec-11
8-Jun-10
8-Jun-11
8-Mar-10
8-Mar-11
Energy (2.1)
(3.0) (2.0) (1.0) 0.0 1.0
1-week Total Return (%)
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 7: S&P 500 sector performance over time Exhibit 8: BEST and WORST performing S&P 500 STOCKS BY SECTOR
as of December 8, 2011 as of December 8, 2011
Total Return Percentage Change (%) BEST STOCKS WORST STOCKS
1-Week 1-Month 3-Month 6-Month YTD 12-Month Return (%) Return (%)
Utilities (2)% (2)% 4% 6% 14 % 17 % Sector Ticker 1-week YTD Ticker 1-week YTD
Cons Discr GCI 14 % (14)% DRI (9)% (4)%
Consumer Staples (0) 0 4 3 10 12
Consumer Staples DF 6 21 ADM (5) (2)
Health Care (2) (2) 2 (4) 8 10
Energy HP 2 22 BHI (11) (13)
Cons Discretionary (0) (2) 7 2 5 5
Financials MS 9 (41) CBG (9) (26)
Information Tech (0) (3) 8 4 4 4
Health Care LLY 3 17 BSX (10) (30)
Energy (2) (5) 4 (6) 3 7
Industrials RHI 4 (8) TXT (7) (24)
Telecom Services (0) (2) 4 (2) 1 6 Info Tech WDC 8 (7) JNPR (10) (46)
Industrials (1) (2) 8 (6) (3) (0) Materials PX 2 10 ATI (5) (14)
Materials (2) (6) (1) (8) (10) (5) Telecom Services VZ 0 11 S (10) (42)
Financials 1 (6) 2 (12) (19) (16) Utilities NEE 2 13 NRG (5) (5)
S&P 500 (1)% (3)% 5% (2)% 0% 3% S&P 500 GCI 14 % (14)% BHI (11)% (13)%
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Goldman Sachs Global Economics, Commodities and Strategy Research 4
5. December 9, 2011 United States
S&P 500 Performance (cont’d)
Exhibit 9: TOP 10 performing SUB-SECTORS over the last week Exhibit 10: BOTTOM 10 performing SUB-SECTORS over the last week
as of December 8, 2011 as of December 8, 2011
Investment Banking & Brokerage 5 Health Care Technology (5)
Human Resource & Employment… 4 Life Sciences Tools & Services (5)
Other Diversified Financial Services 4 Agricultural Products (5)
Homefurnishing Retail 3 Electronic Equipment & Instruments (5)
Home Improvement Retail 2 Health Care Facilities (5)
Homebuilding 2 Oil & Gas Equipment & Services (5)
Brewers 2 Casinos & Gaming (6)
Auto Parts & Equipment 2 Coal & Consumable Fuels (7)
Industrial REITs 2 Home Entertainment Software (8)
Semiconductor Equipment 2 Real Estate Services (9)
0 2 4 6 (10) (9) (8) (7) (6) (5) (4) (3) (2) (1) 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 11: TOP 10 performing S&P 500 STOCKS over the last week Exhibit 12: BOTTOM 10 performing S&P 500 STOCKS over the last week
as of December 8, 2011 as of December 8, 2011
Return (%) Return (%)
Company Name Ticker Sector 1-week YTD Company Name Ticker Sector 1-week YTD
Gannett Inc. GCI Cons Discr 14 (14) Baker Hughes BHI Energy (11) (13)
Morgan Stanley MS Financials 9 (41) Tesoro Corp. TSO Energy (11) 17
Western Digital WDC Info Tech 8 (7) Juniper Networks JNPR Info Tech (10) (46)
JPMorgan Chase JPM Financials 6 (22) Boston Scientific BSX Health Care (10) (30)
Dean Foods Co. DF Consumer Staples 6 21 Newfield Exploration NFX Energy (10) (43)
Northern Trust NTRS Financials 5 (28) Sprint Nextel Corp. S Telecom Services (10) (42)
CarMax Inc. KMX Cons Discr 5 (4) Darden Restaurants DRI Cons Discr (9) (4)
eBay Inc. EBAY Info Tech 5 11 Halliburton HAL Energy (9) (18)
Lowe's Cos. LOW Cons Discr 4 1 Agilent Technologies A Health Care (9) (17)
Tellabs Inc. TLAB Info Tech 4 (39) CBRE Group Inc CBG Financials (9) (26)
S&P 500 Average (1) (1) S&P 500 Average (1) (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 5
7. December 9, 2011 United States
Revisions
Exhibit 17: EARNINGS and SALES REVISIONS Exhibit 18: Stocks with the most POSITIVE and NEGATIVE EPS REVISIONS
Aggregate dollars % change, as of December 8, 2011 as of December 8, 2011
EPS REVISIONS SALES REVISIONS POSITIVE 2012 EPS REVISIONS NEGATIVE 2012 EPS REVISIONS
1 month 3 month 1 month 3 month 1 month 3 month 1 month 3 month
12E 13E 12E 13E 12E 13E 12E 13E Ticker Revis. Return Revis. Return Ticker Revis. Return Revis. Return
Consumer Staples 0.1 % 0.1 % (1.3)% (1.7)% 0.4 % 0.4 % 0.0 % 0.1 %
WDC 186 % 13 % 4% 11 % SHLD (112)% (25)% (127)% 7%
Industrials 0.0 (0.3) (3.0) (3.7) (0.4) (0.3) (1.1) (1.6)
DE 10 2 7 (0) NFLX (53) (23) (86) (67)
Consumer Discretionary (0.1) (0.2) (2.1) (2.3) (0.4) (0.4) (1.0) (1.0)
SUN 9 2 8 1 MU (18) (2) (61) (7)
Utilities (0.1) (0.4) (0.7) (0.6) NM NM NM NM
Health Care (0.1) (0.2) (0.6) (0.5) (0.7) 0.1 (0.7) (0.1) PHM 7 2 39 35 AMAT (18) (14) (18) 1
Energy (0.2) 0.5 (5.6) 1.5 (1.0) 4.2 (9.3) 1.3 DNR 7 (8) (9) 8 TLAB (14) (9) NM 0
S&P 500 (0.3) (0.2) (3.6) (2.7) (0.4) 0.7 (2.4) (0.2) CTL 7 (5) 28 6 MPC (14) (11) (11) (10)
Information Technology (0.4) 0.1 (0.6) (0.5) (0.4) (0.4) (1.1) (0.6) RAI 5 4 5 8 ADI (13) (6) (15) 6
Telecommunication Services (0.6) 0.2 (7.1) (8.2) 0.1 0.6 0.3 1.2 DHI 5 2 0 25 WY (13) (4) (36) (3)
Materials (0.7) (0.4) (9.1) (5.0) 0.4 0.6 0.0 0.1
TSN 5 3 5 18 CSC (12) (24) (15) (12)
Financials (0.7) (1.1) (8.2) (8.8) NM NM NM NM
AKS 4 (9) (34) (3) HPQ (11) (1) (14) 16
S&P 500 (0)% (3)% (4)% 5% (0)% (3)% (4)% 5%
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 19: S&P 500 1-Month EPS Revision Sentiment vs. 1-Month Return Exhibit 20: 1-Month Earnings Revision Sentiment by SECTOR
as of December 7, 2011 as of December 7, 2011
60% 30 % 4%
2%
S&P 500 1-Month FY2 EPS Revision Sentiment (lhs)
40% [(# pos. revisions - # neg. revisions)/ total revisions] 20 % 0%
1-Month Revision Sentiment
S&P 500 Monthly % Return
(2)%
Earnings Sentiment
(4)%
20% 10 %
(6)%
(8)%
(0)% 0%
(10)%
(12)% 1-Month Earnings Revision Sentiment by Sector
(20)% (10)%
(14)%
[(# pos. revisions - # neg. revisions)/ total revisions]
Price Performance (rhs) (16)%
(40)% (20)%
Energy
Health Care
Consumer Discr
S&P 500
Materials
Info Tech
Industrials
Consumer Staples
Utilities
Financials
Telecom Services
(60)% (30)%
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
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 7
8. December 9, 2011 United States
Valuation
Exhibit 21: Aggregate valuation metrics for S&P 500 and sectors Exhibit 22: Standard deviation vs. 10-year history (Z-Score)
bottom-up consensus valuation, as of December 8, 2011 bottom-up consensus, as of December 8, 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 1.3x 7.1x 2.1x 6.5 % 1.0x 11.8x S&P 500 (1.0) (1.7) (1.4) (1.2) (1.7) (1.9) (1.6)
Telecommunication Services 1.8 5.9 1.8 9.7 2.7 16.9 Financials NM NM (1.7) NM (1.0) (1.2) (1.2)
Consumer Staples 1.2 9.4 3.5 5.5 1.6 14.4 Health Care (1.3) (1.0) (0.9) (2.2) (0.5) 2.6 (0.9)
Consumer Discretionary 1.3 7.2 2.9 6.4 1.0 14.0 Information Technology (0.5) (1.0) 0.9 (1.4) (1.1) (0.6) (0.8)
Utilities NM 7.5 1.5 1.9 3.9 13.9 Energy (0.6) (0.5) 0.0 1.0 0.6 (0.7) (0.2)
Industrials 1.5 8.6 2.5 6.5 0.8 12.3 Materials 0.2 (0.4) 0.8 (0.1) 0.1 (0.5) 0.0
Information Technology 2.0 7.7 3.4 8.0 0.9 12.0 Consumer Discretionary 2.5 0.8 2.4 (0.2) 0.0 (0.2) 0.4
Materials 1.3 6.6 2.4 6.4 0.9 11.8 Industrials (1.1) 0.2 1.3 1.3 0.6 (1.4) 0.4
Health Care 1.1 7.1 2.4 9.5 1.3 11.1 Telecommunication Services (0.2) 1.8 1.0 0.2 3.4 2.6 1.4
Energy 1.0 4.8 2.0 2.8 0.7 10.1 Utilities NM 1.4 0.6 0.0 1.7 3.8 1.4
Financials NM NM 0.9 NM 0.8 9.5 Consumer Staples 2.4 2.8 0.0 1.3 2.0 2.7 2.2
Source: Compustat, FirstCall, via FactSet, and Goldman Sachs Global ECS Research. Source: Compustat, FirstCall via FactSet, and Goldman Sachs Global ECS Research.
Exhibit 23: Historical NTM P/E and LTM P/B values for the S&P 500 Exhibit 24: Top stocks by fastest 2012E earnings growth and lowest NTM P/E
aggregate bottom-up consensus valuation, as of December 8, 2011 by sector, as of December 8, 2011
30 GROWTH VALUE
25 Fastest EPS Growth (%) Lowest P/E (x)
P/E Sector Ticker 2012E 2013E Ticker NTM Rel to SPX
NTM P/E (x)
20
15 Cons Discr AMZN 67 83 GCI 5.9 0.5
10 Consumer Staples DF 24 25 SVU 5.7 0.5
11.8
5 10-yr rolling avg
Energy NBR 54 17 VLO 4.8 0.4
0
1/76 1/79 1/82 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09 1/12 Financials ZION 75 26 LNC 5.1 0.4
Health Care EW 39 28 CI 7.8 0.7
6
Industrials LUV 97 33 RRD 7.4 0.6
5
P/B
LTM P/B (x)
4 Info Tech MU 81 NM FSLR 5.5 0.5
3 Materials ATI 49 31 CLF 5.7 0.5
2
10-yr rolling avg Telecom Services AMT 68 26 PCS 10.1 0.9
1 2.1
0 Utilities NRG 25 (20) AES 8.8 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 1/12
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 8
9. December 9, 2011 United States
S&P 500 Factor Performance
Exhibit 25: S&P 500 factor return ranking for the week ended December 8, 2011 (a)
Last Week Spread (%) Performance Spread of Top Quintile Less Bottom Quintile (%)
Last Last Five Trading Days Last Last
Growth Metrics
(b) (2) (1) 0 1 2 Week 2-Dec 5-Dec 6-Dec 7-Dec 8-Dec Month Quarter
EPS Growth (0.5) 0.4 0.4 (0.2) (0.4) (0.8) (0.6) 3.2
GROWTH (1.3) 0.2 0.4 (0.2) (0.7) (1.0) (1.4) 1.3
EBITDA Growth (1.3) 0.1 0.2 (0.1) (0.9) (0.6) (0.8) 2.3
Sales Growth (1.9) (0.3) 0.3 (0.5) (0.6) (0.8) (1.7) (0.2)
(b)
Value Metrics
EV/DACF 1.5 0.0 (0.3) 0.7 0.3 0.9 2.5 5.2
P/B 1.4 0.0 (0.2) 0.2 (0.2) 1.5 3.3 10.0
EV/EBITDA 1.2 (0.0) (0.2) 0.5 0.1 0.7 1.3 5.0
VALUATION 0.8 0.3 (0.2) 0.3 (0.2) 0.6 1.5 7.4
EV/FCF 0.6 0.5 (0.1) 0.5 (0.2) (0.1) 0.3 1.5
P/E 0.6 0.3 (0.1) (0.0) (0.0) 0.4 1.3 8.2
P/Div (1.1) (0.1) 0.1 (0.4) (0.3) (0.5) (1.3) 2.9
(b)
Profitability Metrics
ROE 0.3 (0.1) (0.4) (0.1) (0.4) 1.3 3.6 5.1
ROCE 0.1 (0.3) (0.3) (0.1) (0.2) 1.0 2.0 6.5
CROCI (0.0) (0.1) 0.3 (0.6) (0.3) 0.6 1.1 6.4
PROFITABILITY (0.1) (0.2) (0.1) (0.3) (0.6) 1.0 2.5 7.3
Other Metrics(c)
Short Interest Level 0.1 0.3 1.3 (0.5) 0.3 (1.2) (2.9) (4.2)
Equity Capitalization 0.6 (0.1) (0.9) 0.5 0.1 0.9 3.6 4.6
(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 9
10. December 9, 2011 United States
Style and Size
Exhibit 26: Total return by style and size over time Exhibit 27: Total return by SECTOR for S&P 500 vs. Russell 2000
as of December 8, 2011 as of December 8, 2011
Total Return Percentage Change (%) Weight (%) 1-Week (% Return) YTD (% Return)
1-Week 1-Month 3-Month 6-Month YTD Sector SP500 R2000 SP500 R2000 ∆ (bps) SP500 R2000 ∆ (bps)
Materials 4 5 (2) (3) 113 (10) (13) 336
Large Cap vs. Small Cap
Financials 13 22 1 (0) 113 (19) (9) (996)
S&P 500 (1) (3) 5 (2) 0
Energy 12 7 (2) (3) 98 3 (8) 1,110
Russell 2000 (1) (4) 4 (8) (7) Consumer Staples 11 4 (0) (1) 97 10 4 647
Large vs. Small (bps) 31 116 30 517 679 Health Care 12 13 (2) (3) 79 8 (1) 923
Utilities 4 4 (2) (2) 66 14 10 345
Growth vs. Value Telecom Services 3 1 (0) (1) 12 1 (9) 1,006
Russell 1000 Growth (1) (3) 4 (1) 2 Industrials 11 16 (1) (1) 12 (3) (9) 561
Cons Discretionary 11 13 (0) 0 (36) 5 (8) 1,282
Russell 1000 Value (0) (3) 5 (5) (2)
Information Tech 20 17 (0) (0) (37) 4 (7) 1,054
Growth vs. Value (bps) (85) (25) (107) 363 414
Index 100 100 (1) (1) 31 0 (7) 679
Source: FactSet and Goldman Sachs Global ECS Research. Source: FactSet and Goldman Sachs Global ECS Research.
Exhibit 28: GROWTH vs. VALUE relative performance over time Exhibit 29: LARGE CAP vs. SMALL CAP relative performance over time
Russell 1000 Growth vs. Value, as of December 8, 2011 S&P 500 vs. Russell 2000, as of December 8, 2011
110
105 S&P 500 outperforming
Value outperforming
105
100
100
95
95
90
90
85
Growth outperforming Russell 2000 outperforming
80 85
Apr-09
Apr-10
Apr-11
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Oct-09
Oct-10
Oct-11
Apr-09
Apr-10
Apr-11
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Oct-09
Oct-10
Oct-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 10
