GOLDMAN: These Are The Highest Quality Stocks In The World

Eric Platt, Sam Ro
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“Low risk-adjusted returns, high correlation, slowing economic growth and rising macroeconomic and policy uncertainty have made equity investing challenging,” says Goldman Sachs’ equity strategy team.

In a new note to clients, the team, led by David Kostin, recommends buying their High Quality Stock Basket instead of the S&P 500.  The basket consists of 50 stocks that rank highly when it comes to balance sheet strength, sales growth stability, earnings growth reliability, and ROE.  They also don’t experience major short-term sell-offs often.

These stocks tend to have high dividend yields, significant foreign sales, and premium valuations.

Goldman recommends buying the whole basket of 50 stocks.  But we pulled the 18 stocks that scored the highest based on the team’s screening methodology.

#18: Amazon.com (NASDAQ: AMZN) - Score 83

Sector: Internet Retail

Average ROE: 47%

2012E Sales Growth: 32%

2012E Earnings Growth: 75%

per cent US Sales: 50%

Dividend Yield: 0.0%

Source: Goldman Sachs

#17: Cameron International (NYSE: CAM) - Score 83

Sector: Oil & Gas Equipment & Services

Average ROE: 16%

2012E Sales Growth: 17%

2012E Earnings Growth: 39%

per cent US Sales: 41%

Dividend Yield: 0.0%

Source: Goldman Sachs

#16: United Technologies (NYSE: UTX) - Score 84

Sector: Aerospace & defence

Average ROE: 23%

2012E Sales Growth: 6%

2012E Earnings Growth: 12%

per cent US Sales: 53%

Dividend Yield: 2.6%

Source: Goldman Sachs

#15: Colgate Palmolive (NYSE: CL) - Score 84

Sector: Household Products

Average ROE: 137%

2012E Sales Growth: 5%

2012E Earnings Growth: 9%

per cent US Sales: 23%

Dividend Yield: 2.6%

Source: Goldman Sachs

#14: Stryker Corp. (NYSE: SYK) - Score 85

Sector: Health Care Equipment

Average ROE: 22%

2012E Sales Growth: 7%

2012E Earnings Growth: 11%

per cent US Sales: 65%

Dividend Yield: 1.4%

Source: Goldman Sachs

#13: National Oilwell Varco (NYSE: NOV) - Score 85

Sector: Oil & Gas Equipment & Services

Average ROE: 12%

2012E Sales Growth: 19%

2012E Earnings Growth: 26%

per cent US Sales: 34%

Dividend Yield: 0.7%

Source: Goldman Sachs

#12: Yum! Brands, Inc. (NYSE: YUM) - Score 86

Sector: Restaurants

Average ROE: 97%

2012E Sales Growth: 6%

2012E Earnings Growth: 12%

per cent US Sales: 36%

Dividend Yield: 2.2%

Source: Goldman Sachs

#11: General Dynamics (NYSE: GD) - Score 86

Sector: Aerospace & defence

Average ROE: 20%

2012E Sales Growth: 4%

2012E Earnings Growth: 7%

per cent US Sales: 82%

Dividend Yield: 3.1%

Source: Goldman Sachs

#10: Coach, Inc. (NYSE: COH) - Score 87

Sector: Apparel Accessories & Luxury Goods

Average ROE: 43%

2012E Sales Growth: 12%

2012E Earnings Growth: 15%

per cent US Sales: 70%

Dividend Yield: 1.5%

Source: Goldman Sachs

#9: Simon Property Group, Inc (NYSE: SPG) - Score 87

Sector: Retail REITS

Average ROE: 15%

2012E Sales Growth: 3%

2012E Earnings Growth: 6%

per cent US Sales: 100%

Dividend Yield: 2.8%

Source: Goldman Sachs

#8: Walgreen Co. (NYSE: WAG) - Score 88

Sector: Drug Retail

Average ROE: 17%

2012E Sales Growth: 3%

2012E Earnings Growth: 11%

per cent US Sales: 100%

Dividend Yield: 2.7%

Source: Goldman Sachs

#7: C.H. Robinson Worldwide (NASDAQ: CHRW) - Score 88

Sector: Freight and Logistics

Average ROE: 29%

2012E Sales Growth: 12%

2012E Earnings Growth: 16%

per cent US Sales: 89%

Dividend Yield: 1.6%

Source: Goldman Sachs

#6: Southern Co. (NYSE: SO) - Score 88

Sector: Electric Utilities

Average ROE: 15%

2012E Sales Growth: 5%

2012E Earnings Growth: 6%

per cent US Sales: 100%

Dividend Yield: 4.4%

Source: Goldman Sachs

#5: TJX Companies Inc. TJX - Score 89

Sector: Apparel Retail

Average ROE: 43%

2012E Sales Growth: 7%

2012E Earnings Growth: 12%

per cent US Sales: 77%

Dividend Yield: 1.3%

Source: Goldman Sachs

#4: PepsiCo Inc. (NYSE: PEP) - Score 89

Sector: Soft Drinks

Average ROE: 35%

2012E Sales Growth: 3%

2012E Earnings Growth: 8%

per cent US Sales: 53%

Dividend Yield: 3.4%

Source: Goldman Sachs

#3: St. Jude Medical (NYSE: STJ) - Score 89

Sector: Health Care Equipment

Average ROE: 23%

2012E Sales Growth: 7%

2012E Earnings Growth: 11%

per cent US Sales: 51%

Dividend Yield: 2.2%

Source: Goldman Sachs

#2: cognisant Tech Solutions (NASDAQ: CTSH) - Score 93

Sector: IT Consulting & Other Services

Average ROE: 25%

2012E Sales Growth: 22%

2012E Earnings Growth: 20%

per cent US Sales: 78%

Dividend Yield: 0.0%

Source: Goldman Sachs

#1: Ecolab Inc. (NYSE: ECL) - Score 94

Sector: Specialty Chemical

Average ROE: 23%

2012E Sales Growth: 6%

2012E Earnings Growth: 13%

per cent US Sales: 52%

Dividend Yield: 1.3%

Source: Goldman Sachs

Outside of straight equities, there are these options to trade

Goldman also has a list of option trades it thinks will outperform this earnings season.
Click here to see the seven trades to put on >

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