The “extraordinary” performance of growth stocks over the past year doesn’t mean those names are slowing down anytime soon, according to Goldman Sachs.
David Kostin, Goldman’s chief U.S. equity strategist, told clients to stick with names in health care as well as consumer discretionary as well as resist jumping into value stocks. Top picks included Micron, Netflix as well as Amazon.
“Steady economic activity as well as a gradually tightening Fed create an environment conducive to further growth stock outperformance,” Kostin wrote Friday. “Long term, we believe value represents an attractive factor tilt as well as investment strategy, yet we expect growth will provide superior short- as well as medium-term returns.”
Goldman highlighted many growth stocks across its coverage with the fastest growth in their sectors based on earnings as well as sales.
Information technology has easily outperformed its rival sectors, up nearly 33 percent over the past 12 months versus gains of 19.7 percent for consumer discretionary as well as 17.8 percent for financials. Still, many investors have grown concerned in which tech’s ascent could give way to a rally in value names as the historic bull market celebrates its ninth birthday.
Citing projections for continued economic growth, Kostin warned against This particular view. The strategist contended in which 2.6 percent gross domestic product growth in 2018 as well as 2.2 percent GDP expansion in 2019 should egg growth stocks higher.
“In environments of healthy yet modest economic growth, investors typically allocate a scarcity premium to firms able to generate superior growth,” Kostin added. “Contrary to common intuition, growth outperformance has not historically signaled subsequent value outperformance. In fact, more often than not growth stock outperformance leads to more growth stock outperformance.”