Markets could be mostly flat next year, says David Kostin, chief U.S. equity strategist at Goldman Sachs. So he suggests fund managers look for companies with potential for margin growth.
"The margins for the market have been virtually static for the last four years," he told CNBC's "Squawk on the Street." "Finding companies with margin expansion opportunities is a key focus; one of our key strategies."
Kostin expects that rising interest rates and slightly higher earnings will lead to contracting multiples and margins next year. "In a world where economic growth is more modest, that's when you want equity growth as opposed to value and so that would be one area of focus," he added.