Market Chasers

Portfolio Update: August 12th, 2008

Since I first started investing in stocks I’ve wanted to have Schlumberger (SLB) in my portfolio. Schlumberger, an oil services company, is widely diversified and technologically progressive. I’ve simply been waiting for a decent opportunity to jump in. Consequently, I purchased shares of SLB on Friday morning for $94.50 per share amidst the steady decline in oil prices of late. Schlumberger has shown consistent growth and holds a P/E multiple about four points higher than its industry’s average, which shows that there is an abundance of buying the stock. I have a great deal of confidence in SLB, so it being slightly overbought doesn’t worry me. I plan to keep at least part of this position for quite some time.

Another industry giant I’ve had my eye on for a few weeks now is the investment servicer Goldman Sachs (GS). There are some very convincing numbers associated with this firm that should be noted. In a very simple earnings analysis, consider the following numbers.

P/E Multiples

• Goldman Sachs: 8.5
• Investment Services Avg: 16.9
• Financial Avg: 15.7
• S&P 500 Avg: 18.1

Earnings Growth Rates

• Goldman Sachs: 25.64% (1-year), 43.78% (5-year)
• Investment Services Avg: 19.44% (1-year), 29.74% (5-year)
• Financial Avg: 0.41% (1-year), 16.55% (5-year)
• S&P 500 Avg: 14.54% (1-year), 23.11% (5-year)

With Goldman’s growth, trading at 8.5x earnings is a bargain. Beyond growth, take a look at the consistency of Goldman’s earnings compared to its competitors. Goldman is one of the few investment services firms that have consistently recorded earnings, meeting or beating expectations through 2007 and 2008. A few of Goldman’s big competitors have recorded devastating losses and failed to meet expectations amidst America’s financial crisis. Merrill Lynch (MER) reported losses and/or failed to meet Wall Street’s expectations for past four quarters, Lehman Brothers (LEH) reported a loss in our last quarter, Morgan Stanley (MS) stumbled in the last two quarters of 2007, and Citigroup (C) reported losses and/or missed expectations for the past three quarters. Goldman has stood strong, giving me confidence in their management and where they put their money. Goldman, however, has recently received a bit of negativity from analysts. Their earnings projections were downgraded by some and Deutsche Bank changed their rating from a buy to a hold. Of course this caused the stock to drop from $178 per share at yesterday’s close to around $168 per share at today’s close. I purchased Goldman at $168 during the late afternoon after its 6% tumble. It has dropped 11% since its mid-July spike, so I took the opportunity and bought in. Thanks for reading.

Justin Shade, www.MarketChasers.com