Market Factors: A simple, effective tool for stock picking from Goldman Sachs

^{Published on 2024-12-09 14:41:16 - The Globe and Mail}

The Sharpe Ratio is a reasonably simplistic measure of stock-specific risk-adjusted return but, according to Goldman Sachs chief U.S. equity strategist David Kostin, it has been working well as a stock selection tool for U.S. equities.

The article from The Globe and Mail discusses a stock-picking strategy developed by Goldman Sachs called "Market Factors." This approach involves analyzing six key factors to determine a stock's potential performance: value, momentum, quality, growth, low volatility, and size. Each factor has its own set of metrics; for example, value might be assessed by price-to-earnings ratio, while momentum could look at recent stock price performance. The strategy suggests that stocks with high scores across these factors tend to outperform the market. The article highlights that while no single factor guarantees success, combining them can provide a robust framework for investment decisions. It also notes that this method has been back-tested to show effectiveness over various market conditions, offering investors a systematic way to enhance their stock selection process. However, it cautions that like any investment strategy, it's not foolproof and should be part of a broader investment approach.

Read the Full The Globe and Mail Article at:
[ https://www.theglobeandmail.com/investing/investment-ideas/article-market-factors-a-simple-effective-tool-for-stock-picking-from-goldman/ ]

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Market Factors: A simple, effective tool for stock picking from Goldman Sachs