Goldman's Cohen says stocks 5-8 pct undervalued
NEW YORK, Aug 24 (Reuters) - Goldman Sachs' U.S. stock strategist Abby Joseph Cohen, one of Wall Street's most respected stock market analysts, stuck to her bullish guns on Monday despite a recently harrowing ride in U.S. stocks.
The three main areas of concern for global investors, she said, are Russia, Brazil and Venezuela. But even these three countries combined account for less than four percent of U.S. exports and ''there is little banking exposure,'' she said in a research note put out on Monday.
She said U.S. stocks are five to eight percent undervalued, and reiterated her well-known year-end price targets for the stock market. She is forecasting that the Dow Jones industrial average will hit 9300 and the Standard & Poor's 500 Index will reach 1150. In both cases, as she has said many times, she expects the indices to easily reach and surpass her targets.
On Friday, the Dow fell as much as 282 points in a frightened sell-off amid fears that emerging markets might start tumbling like dominoes as Russia's fiscal troubles might spread to Latin America, notably Venezuela and Brazil. The Dow reclaimed most of the losses after a 200-point rally carried the average higher, closing at 8533.65, down 77.76.
Goldman Sachs's chief economist Gavyn Davies has not changed the firm's global Gross Domestic Product forecast even in light of the downturns in some emerging markets, she noted.
''Most of the countries recently viewed to be 'at risk' tend to be relatively small,'' she said.
''From the standpoint of the United States economy, the three 'countries of the week' have only small trade effects,'' she said. U.S. exports to Russia account for less than one percent of total exports; exports to Venezuela about one percent; and exports to Brazil are about two percent.
She also repeated Goldman's view that most U.S. financial institutions have little exposure to these nations and may already be heavily reserved, and said Goldman sees no new evidence that the Japanese impact on U.S. trade or bank credit has worsened.
The best way to describe the recent market upheavals, she said, is a ''a widening of risk premia.''
As investors raced to put money into areas perceived as having low risk, such as U.S. dollar-denominated assets and especially U.S. Treasuries, the implied risk premium in U.S. equities has risen, especially for small and mid-cap stocks.
''U.S. equities have been impeded by the rise in global volatility and worries about the impact on earnings. Given our view that the United States will continue to enjoy an elongated economic and profit expansion, we view these concerns as overdone,'' Cohen said in the note.
Earlier, Goldman Sachs Group Inc filed with U.S. regulators to go public. The long-awaited registration statement, however, was for just $10 million dollars -- offering few clues to satisfy Wall Street's voracious interest in the upcoming initial public offering.
Analysts said the $10 million figure is a random number, and does not indicated the ultimate value of the deal, which has been heralded as one of Wall Street's largest IPOs ever, with estimates ranging from $2.5 billion to $4.0 billion. |
