Monday, January 13, 2014

Stock Market: Ignore Goldman Sachs, Follow Google, Suntory & Co.

(Drivebycuriosity) - Today the stock market dropped sharply (S&P 500 minus 1.3%). According to the media investors responded to Goldman Sachs. Yesterday the bank published a warning that the U.S. stock market is expensive after the huge rally of 2013. Goldman Sachs claims that the stock market valuation (price earning ratios) is lofty and already higher than the historical average (businessinsider).

Leading companies think otherwise. Today were 3 important mergers announced (or at least intended):

Google paid $3.2 Billion for Nest, a home automation startup who´s products include Internet-connected thermostats and smoke detectors.

Charter Communication offered $61 Billion for Time Warner Cable and got rejected by the object of desire who claims that the price is too low.

Suntory, a gigantic Japanese producer of spirits, wants to buy the maker of Jim Bean whiskey for $13.6 Billion.

Those mergers show that Goldman Sachs` warning is just noise. The buyers don´t believe that stocks are lofty valued. Instead their offers signal that Google, Suntory & Co. think that stocks are still cheap, otherwise they wouldn`t take the costs & risk of a merger. Those companies should have a much better understanding of their markets than a bank. Maybe investors should ignore Goldman Sachs and follow the buyers.

1 comment:

  1. Didn't GS say the same thing at about the same time last year?
    My experience with GS calls is 50/50 or less so I've learned to ignore them