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Why Goldman Sachs Group, Inc. (GS) Is One of the Best Cheap Stocks to Buy for 2025?
We recently compiled a list of the 15 Best Cheap Stocks to Buy for 2025.In this article, we are going to take a look at where Goldman Sachs Group, Inc. (NYSE:GS) stands against other best cheap stocks to buy for 2025.
The U.S. consumer prices report released this week revealed a less-than-expected increase in December, signaling a potential cooling in inflation pressures. This data has sparked bets on further tame inflation and a drop in interest rates. The core consumer price index (CPI), which excludes volatile food and energy prices, increased by 0.2%, down from 0.3% over the previous four months. This marks the first decrease in the rate of core CPI growth in six months, driven by lower hotel prices, slower increases in medical care costs, and moderate rent growth.
The data has renewed hopes that the Federal Reserve might ease interest rates sooner than anticipated. Before the report, most market participants expected rate cuts to occur in the second half of the year, if at all. However, the latest data has bolstered expectations for two cuts this year and even the possibility of a rate cut as early as March. Following the release, Treasury yields dropped, the S&P 500 rose, and the dollar weakened.
The sharp surge in equity prices is not surprising, as lower interest rates are generally bullish for several reasons. When interest rates fall, borrowing becomes cheaper for companies, which can lead to increased investment and expansion. Stock prices are often valued based on the present value of future earnings or cash flows, discounted by interest rates. Lower interest rates reduce the discount rate, increase the present value of future earnings, and make stocks appear more valuable.
In an interview with CNBC on January 16, Christopher Waller, Governor of the Federal Reserve, discussed the recent economic data and its implications for future monetary policy decisions. Waller welcomed the strong jobs report from the previous week and the latest inflation prints, which he found particularly encouraging. He noted that the inflation data was very positive, with core PCE inflation coming in below 0.2% for the sixth month out of the last eight. This trend, he believes, is bringing inflation closer to the Fed’s 2% target in terms of core, despite a couple of bumps in September and October.
Waller emphasized that while the inflation data is promising, it is crucial to see if this trend continues. He mentioned that base effects from last year will play a role, but he is hopeful that a repeat of the shock experienced in January and February of last year will not occur again. If the current trend persists, he suggested that rate cuts could be on the table in the first half of the year.
When asked about the exact timing of potential rate cuts, Waller indicated that much depends on the continued improvement in inflation data. He stressed that the Fed is not in a rush to act, as Chair Jerome Powell has stated, and that they need to see more progress on inflation before making any decisions. Waller mentioned that while March is not entirely ruled out, any significant economic disruptions could push the timeline back. Regarding the number of rate cuts that might be expected this year, Waller reiterated that the data will drive the Fed’s decisions. He noted that the extent of progress on inflation and the perception of the neutral rate among policymakers will influence the number of cuts.
The latest consumer price data has sparked optimism among investors, as easing inflation and the possibility of interest rate cuts create a more favorable environment for businesses and markets.
Why Goldman Sachs Group, Inc. (GS) Is One of the Best Cheap Stocks to Buy for 2025?
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Our Methodology
To compile our list of the 15 best cheap stocks to buy for 2025, we used Finviz and Yahoo stock screeners to find the 40 largest companies trading below the forward P/E ratio of 15 as of January 15. We then used Insider Monkey’s Hedge Fund database to rank 15 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Goldman Sachs Group, Inc. (NYSE:GS) is a leading global investment banking, securities, and investment management firm with a history dating back to 1869. The firm operates across four main business segments: Global Banking & Markets, Asset & Wealth Management, Consumer & Wealth Management, and Platform Solutions.
The Goldman Sachs Group, Inc. (NYSE:GS) is focusing on enhancing its financing capabilities and expanding its leadership in private credit. The firm recently formed the Capital Solutions Group to provide a comprehensive suite of financing, origination, structuring, and risk management services. This strategic move is designed to capitalize on the growing trend of private credit and alternative asset classes, which offer investors superior returns and diversification.
Additionally, The Goldman Sachs Group, Inc. (NYSE:GS) is investing in digital capabilities to enhance the client experience and drive operational efficiency. The firm is scaling its flagship fund programs and developing new strategies to attract both institutional and third-party wealth clients. These efforts are expected to drive high-single-digit annual growth in the coming years.
The Goldman Sachs Group, Inc. (NYSE:GS) has also launched a three-year program to optimize its organizational footprint, manage expenses, and leverage technology to drive productivity. This includes expanding its presence in strategic locations, optimizing transaction-based expenses, and reducing operating costs associated with consolidated investment entities. The Goldman Sachs Group, Inc. (NYSE:GS) is also investing heavily in artificial intelligence (AI) and automation to modernize its technology to transform its engineering capabilities.
Overall GS ranks 13th on our list of the best cheap stocks to buy for 2025. While we acknowledge the potential of GS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
