Dow Afternoon Report: Goldman Sachs Leads Rebound

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) started the day down 78 points but has since rebounded on a surge from Goldman Sachs (NYSE: GS  ) and is now nearly flat for the day. As of 1:30 p.m. EST the Dow is just above breakeven. The S&P 500 (SNPINDEX: ^GSPC  ) is up five points to 1,772.

Goldman Sachs started the day down but rebounded as the day went on and is now up 0.6%. With its high stock price, Goldman is the third-largest stock on the Dow by weight. Weighting by stock price is a terrible method, but the DJIA is stuck with it. I recommend investors follow the S&P 500.

GS Chart

GS data by YCharts.

Yesterday, Goldman CEO Lloyd Blankfein spoke at a conference organized by Bank of America. Blankfein talked about the challenges his bank has faced and the company's returns. He noted that Goldman's 10.4% return on equity wasn't great but was better than rivals', noting, "While we have generated good relative returns in the last five years, they are hardly aspirational." Analysts pointed out that the double-digit ROE only came because of a large drop in compensation as a percentage of revenue, falling from 43% to 35%.

Still addressing ROE, Blankfein said, "I happen to think that's a pretty high number given that the risk-free rate of return is zero." He added: "Difficult operating environments might lead management teams to overreact. However, when you have a strong franchise and a track record of superior returns, overreacting may be the most dangerous thing that you can do."

Corporate managers are human like everyone else and are prone to mistakes at the worst possible times by buying high and selling low and taking on too much debt, among other blunders. But Blankfein's point should be taken to heart by investors: If you can find a strong business with a history of strong returns and a capable and focused management team, you should stick with it for the long term.

"Set It and Forget It" Investments
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2725177, ~/Articles/ArticleHandler.aspx, 9/26/2016 3:03:55 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
GS $165.13 Down -2.89 -1.72%
Goldman Sachs CAPS Rating: ***
^GSPC $2164.69 Down -12.49 -0.57%
S&P 500 INDEX CAPS Rating: No stars