The stock market has been trending downward for the past six months after reaching all-time highs last November. Many of the fastest-growing stocks ran up equally rich valuations and have since come crashing down. Others were hurt by high inflation, COVID-19, the war in Ukraine, higher interest rates, or all of the above.
But it helps to put this correction in perspective by looking back to the crash of March 2020. While it didn't last as long, the fall was more precipitous. Looking back at the performance of one stock in particular, Goldman Sachs (GS +1.09%), shows how an investment in that stock near its low point at the start of the pandemic would have doubled your money just over two years later -- including this current swoon.
Goldman Sachs navigates the downturns
Goldman Sachs is one of those companies that everyone knows, as it's been around since the 19th century. It's one of the leading investment banks in the world and also has a robust institutional trading business, along with asset management and consumer banking/wealth management operations.
It's a market leader in two of its business -- investment banking and global markets, which is the institutional trading business. Given its strength in those markets and its diverse revenue stream, Goldman Sachs has been able to adeptly navigate various market conditions.
Let's take a look at its performance going back a couple of years. After hitting around $250 per share in mid-January of 2020, Goldman Sachs plummeted all the way down to $134.97 on March 23, 2020 -- which turned out to be its low point. That represented a decline of about 46%. While it's impossible to recognize the bottom when it arrives, if you had invested $5,000 in the stock sometime in those ensuing weeks, you would have gotten a blue-chip market leader for about $146 per share when trading opened on April 1.
NYSE: GS
Key Data Points
Over the next 18 months, Goldman Sachs stock soared to over $400 per share, topping out at $416.60 on Nov. 2, 2021. It was fueled by gains in both its trading business, which benefited from volatile markets, and investment banking, as mergers and acquisitions (M&A) and advisory deals skyrocketed in 2021.
We all know what's happened to the market since November of 2021. Goldman Sachs, because of its efficient management, relatively stable valuation, diverse revenue streams, and market-leadership status navigated the bumps better than most. The stock price went from its Nov. 2 high around $416 down to its recent price around $309. That's a decline of about 25% -- including roughly 19% year to date.
Doubling in value
Even with this deep decline in value since November, Goldman Sachs' stock price has more than doubled since the end of March 2020.
If you had invested $5,000 in Goldman Sachs on April 1, 2020, you would have bought about 34 shares at $146 per share. Those 34 shares would be worth about $10,500 right now, so you would have more than doubled your initial investment. If you already held Goldman Sachs and sold in April 2020 to "cut your losses," you only would have been cutting your future gains.
As for Goldman Sachs right now, it's attractively valued, with a price-to-earnings ratio of around 6 and a price-to-book ratio of 1, which means it's trading roughly in line with the book value of the company. With its strengths and advantages intact, the stock looks like a good long-term buy right now.
There's a great investing lesson to be learned from all this. If there's a stock in your portfolio that you've thoroughly researched and believe in that may be going through a volatile time, your best bet might be to hold on. Like Goldman Sachs, it may bounce back higher than it fell.
