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Pro Analysis

Goldman: Market going nowhere, so buy these stocks

Wall Street, after hours
Spencer Platt | Getty Images

Goldman Sachs told clients the market will be flat the rest of the year, but there is still an investment strategy that will outperform.

The firm forecasts the S&P 500 will trade at 2,100 at the end of 2016, about where it is now. Even though the firm's current activity indicator, a measure of economic growth, slowed to 1.3 percent, Goldman's David Kostin still projects U.S. GDP growth will improve to 2.3 percent in the second half of the year.

"Firms with the highest operating leverage will benefit most from improving activity and the associated pickup in sales growth," Kostin wrote in a note to clients Friday. "Operating leverage is highest in Health Care and lowest in Materials and Energy."

High operating leverage is defined by companies with "high fixed costs relative to variable costs." The market is already discounting the move as Goldman Sachs' "high operating leverage" stock basket has returned 23 percent versus 17 percent for low operating leverage list since mid February. Kostin says this trend will continue.

Here is a selection of seven Goldman Sachs "high operating leverage" recommended stocks.