Buy GS asap
Stop Loss: $110
Expected timeframe: 6 months -- 2 years
On April 16, 2010, the SEC charged Goldman Sachs with defrauding investors in the sale of securities related to sub-prime mortgages. This was really just something to save credibility after the miserable job they did of regulating banks before the sub-prime mortgage disaster. At the time, GS was trading at over $184. Over the next two months, GS dropped to $130.
On June 14, 2010, I read an article titled, "Big Bank Lawsuits Won't Hit Bottom Line" and I'd like to quote the most important part:
"Experts are split on whether the SEC can offer a believable case in court. The suit is related to the investment firm's actions in a particular deal at the height of the subprime frenzy. It's debatable whether Goldman's actions -- even if unsavory -- actually broke any laws, and the regulator has so far presented little evidence to that effect."
Goldman Sachs makes $14 billion per year in profits. Not sales, but profits. How big a fee could the SEC charge that would even make a dent in this enormous company? Does it stand to reason and common sense that Goldman Sachs should drop over $50/share based on this allegation that holds little weight and will likely bring a relatively small fee? This is an excellent example of investors over-reacting and driving the stock far below what the price should be.
I bought Goldman Sachs on July 9, 2010, at just under $138 with the prediction that it will go to recent highs of $185/share within 2 years. That's giving me plenty of time -- I actually think it will get there sooner but I'm not sure how much sooner.
The stop loss is $110 -- if it goes anywhere near that something is seriously wrong and it's time to get out. It has already gone up to $147 and not likely to even go back to previous lows of $130. Buying down at these prices is getting bargain basement prices on an industry leader, the big dog on Wall Street.
Goldman settled with the SEC on July 15, 2010, for $550 million, or about 4% of its annual profits. It no longer has any reason to be down here at these prices.