Goldman Sachs Adds 13% of the DJIA To its Conviction Buy List In Past Two Days

August 9, 2011 10:55 AM EDT
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In the past two days alone, Goldman Sachs has added four of the bluest of the blue chips to its venerable Conviction Buy List. All four are constituents of the Dow Jones Industrial Average.

Many of these stocks are defensive in nature and pay great dividends. The call suggests that Goldman is telling their investors to enter large-cap names with proven track records in rocky times.

Here are the moves:

  • August 8 - Boeing (NYSE: BA) added to its Conviction Buy with a price target of $86. The firm said Boeing is attractive in a less certain macro backdrop due to the secular drivers it offers beyond the cyclical. Most notably the 787 product cycle and the unusually large backlog.

  • August 8 - Coca-Cola (NYSE: KO) added to Conviction Buy with a price target of $77. The firm said Coke is the ideal stock to own in a slower-growth macro environment. They cited: (1) a highly visible, 10% EPS growth outlook; (2) market share momentum in global beverages; and (3) an undemanding valuation (16X NTM P/E), below the historical average (17-18X).

  • August 9 - McDonald's (NYSE: MCD) was upgraded to Buy and added the stock to the Conviction Buy. The firm set a price target of $96. The firm sees the potential for 20% total return, with the dividend. Goldman said the return profile is particularly attractive in the current uncertain environment given their analysis which suggests little statistical correlation between MCD's SSS growth and the macroeconomic backdrop in either the US or Europe.

  • August 9 - Pfizer (NYSE: PFE) was added to the Conviction Buy with a price target of $22. The firm cited: (1) a dynamic management team that has shown commitment to delivering value to shareholders though announced spin-offs/divestitures and dividends/share buybacks; (2) significant 2H2011 pipeline catalysts that could change investor sentiment; (3) management’s focus on fixing the R&D engine could drive significant long-term value if successful, and (4) significant and building cash balances that affords tremendous flexibility.
The firm also added AmerisourceBergen (NYSE: ABC), The TJX Companies, Inc. (TJX), CSX (NYSE: CSX), and Edwards Lifesciences (NYSE: EW) to its Conviction Buy in the last two days.

UPS (NYSE: UPS), WellCare Health Plans (NYSE: WCG), and Embraer (NYSE: ERJ) were removed from the list over the past two days.

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