Goldman Sachs, a Contrarian Bet ??

Following the news that the United States most prominent investment bank (Goldman Sachs - GS) has been hit with fraud related charges by SEC gave every pundit, every blogger, a chance to comment their personal views. Right? 

Right! WealthyOpinions is no exception. Hence following are my views on the whole situation. 

Since the news broke out on Friday the stock was crushed down from $184 to $155, but closed slightly higher at $160.70. The final tally was, down $23.57 or 12.79%.

Back in 2008, at the time of financial tsunami, many of the experts on the streets were blaming GS for the debacle and were shouting that the firm is/was most unethical investment bank on Wall Street….blah-blah.

(Back to present) I will raise the same question(s) again, "as to how many of us believe in the said statement?"

Anyhow, am I no one to judge the situation without knowing the facts, but Fridays drop  in the price of GS provides a contrarian opportunity to grab the stock at a lower price?

I once read a statement, and its so very true, in the newsletter of Scion Capital, by Michael Burry, that "the real opportunity in any market of common stock will occur when it is the investor who carry the pessimism."

This statement is been mentioned in many other ways by numerous investors/gurus in the past, such as Warren Buffett, Seth Klarman etc.; statements like "Buy when others are selling" "Buy when there is blood on the street" etc.

So does this mean that the price drop is really a BUY opportunity???

I was checking the consensus recommendations of various analysts on GS and found that only one firm has downgraded the stock based on the recent event. There are 22 analysts (still) rating a BUY and 7 rating HOLD. The mean target price (12 months) is expected @ $211.

Going forward, it will be interesting to watch the outcome of the case. Further, based on the current situation how many analysts will actually downgrade GS?? For now it only Oppenheimer!!!

So should we really BUY GS or should we say BYE GS??

The current PE is roughly 7x(TTM) earnings and the the forward PE is expected at roughly 8x to 9x.

Happy Investing!!!