Sell Block: Time to Release Goldman Sachs
Cramer was right last week when he predicted the response to Goldman Sach’s fourth-quarter report. Despite the strength of the company, he figured the short-sellers would find some way to rumor down the stock. That’s why he recommended Homegamers wait until after the bear raid if they wanted to buy a position.
Well, the time to buy Goldman is now, he told viewers tonight on Mad Money. Usually, Thursdays are the day when Cramer urges Homegamers to sell stocks, to put these lagging equities into the Sell Block. But this Thursday it was about prisoner release, he said.
So why’s Goldman being let out? Two reasons: sovereign wealth funds and the firm’s prime brokerage business.
Sovereign wealth funds have already overtaken hedge funds and private equity in dollar size, totaling $2.2 trillion in assets while the other two equal $1.5 trillion and $1.1 trillion, respectively. Cramer also quoted Morgan Stanley, which forecast sovereign wealth funds will grow to $17.5 trillion by 2017.
Right now, other brokerages are merely targets of these sovereign wealth funds, which invest a nation’s assets. Goldman, on the other hand, has the stability and cash to get the funds as clients. “I believe that Goldman is going to surf this sovereign wave better than any other American or worldwide investment company,” Cramer said.
Goldman’s prime brokerage business should exceed the company’s competitors for the same reason. In an industry filled with struggling institutions, Goldman offers hedge funds, its prime brokerage clients, stability. “What kind of a nut wants to keep their money with a firm that has to go hat-in-hand to the Chinese or to Dubai because they themselves don't have enough capital that they can lend to you?” Cramer asked, describing Goldman’s rivals.
He figured Goldman will earn $30 a share in 2008, which means the stock trades at only seven times earnings.
“This is back-up-the-truck time,” he said.
Jim’s charitable trust owns Goldman Sachs.
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