It is possible to destroy a brand name. Make enough mistakes, tick enough people off, and you could find that your former intangible gold mine is worth about as much as a wad of chewed gum.
When you consider a brand like the one that Goldman Sachs
And that is exactly why I don't think that the recent struggles at Goldman's Global Alpha hedge fund are an adequate reason to get bearish on the stock. With thousands of nameless hedge funds out there to overwhelm institutions and high-net-worth individuals, it's going to be hard to overlook the weight that Goldman's name carries -- performance or not.
Additionally, the thing about performance is that it is best measured over time. I read recently that Legg Mason's
The other impressive thing about Goldman's brand is that along with bringing in plenty of clients, the firm has arguably some of the best access to the absolute top talent around the world. And quite simply, if the guys managing Global Alpha can't find a way to turn it around, Goldman can no doubt get its hands on somebody who can.
The other question that my formidable foe, the very Foolish Tom Taulli, raises is with regard to Goldman's major moves in the private-equity arena. As readers confirmed in the last duel between Tom and me, they are downright bearish on the future consequences of the wave of huge private-equity buyouts. I'm not going to try to wage that war again, but when it comes to Goldman, I would be sure to note that the firm benefits from the following when it comes to its P/E arm:
- Debt is cheap and plentiful right now, so it's getting great debt terms on the buyouts that it's doing.
- By and large, the companies being bought out are good companies. I'd agree that the price for Alltel
(NYSE:AT)wasn't exactly a steal, but this is a solid company with good prospects. A worst-case scenario is a disappointing return, not a complete blowup.
- As soon as Goldman gets money invested, it starts earning fees for just having the money invested. How can you argue with that?
The bottom line is that there is going to be a lot of money made in money management, and particularly in the high-fee area of private equity and hedge funds. I don't doubt that some amount of excess will lead to some amount of tears, but I see most of the weeping coming from weaker firms on the margin. Goldman, meanwhile, should continue to be the Wall Street golden boy.
Coca-Cola, Legg Mason, and Microsoft are Inside Value recommendations.
Fool contributor Matt Koppenheffer thinks it's only time before we get a Goldman alumnus for president. Matt does not own shares of any of the companies mentioned. The Fool's disclosure policy worked for Goldman for a brief stint in the mid 1980s but got tired of the stodgy dress code.