Barron’s, By Ben Levisohn | August 26th, 2014 (Read article)
Yes, says MKM’s David Trone and Pankaj Chitrakar, who initiated Goldman Sachs (GS) with a buy rating today. They explain why:
Earnings Quality Improving. In 2Q14, ~40% of Goldman Sachs’ revenue was contributed by trading, with the balance split between inv. mgmt., inv. banking, and principal inv. We believe the market views trading and principal inv. as lower quality earnings given the associated capital intensity, risk and volatility. The good news is that the more highly-valued inv. banking and inv. mgmts. units are recently demonstrating greater growth, while trading has lagged and principal inv. has remained in a range.