Goldman Sachs: Investors should turn back to stock picking

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The S&P 500 is already 17% above the bottom, and investors have to turn to individual stock selection to maximize their return, according to Goldman Sachs strategists.

Selection opportunities are richest among the healthcare and communications services. They highlight shares such as Monster Beverage, WellCare Health Plans, Incyte, Twitter and NVIDIA.

The rise in stock markets after the bottom of December is defined as a "macro" trade where the whole market has risen, the defensive has slowed down and the cyclics have made the way up. As a result, stocks became extremely correlated to each other and to the market. Now at the 94th rate, correlation is the fourth largest in history, and Goldman offers several stocks that have a large "dispersion" or strong trend.

 Correlations remain above average

"We are predicting a stable macro environment in the short term, characterized by economic activity in the US and the Fed's patience, which we think is already reflected in the markets," said the strategists. They expect a limited traffic movement for the S & amp; P 500 to 2,750 at the middle of the year and 3,000 by the end of 2019.

Ie. expectations are for consolidation over the next 3-6 months. So stock selection would be more correct than buying the entire market and ETF of sectors.

"We saw the emerging signs of this rotation as" alpha, "with ETF outflows outperforming outflows from mutual funds, but when stocks rose by 8% in January, investors dropped ETFs and outflows swelled to $ 32 billion, compared with only $ 8 billion for mutual funds.

 Exhibit 3 - Returns have become more macro-driven in recent months

Goldman's strategies have created a stock of stocks that have a "high dispersion," which means they move more than micro-factors.

"High Dispersion Shares are more likely to increase their value in idiosyncratic news and to perform best with alpha generation." It is important to note that high dispersion results do not necessarily offer only positive gains, - the most recent return that deviates the most from market returns in any direction. "

Included in the Goldman list are Advanced Micro Devices, UnderArmour, United Continental, Newmont Mining, Best Buy, Activision Blizzard, GAP, Nordstrom, Newell Brands and Dish Network.

Source: CNBC

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