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Goldman's 'earnings revision' strategy beats market, generates 20 percent-plus returns

Constellation Brands' Corona Light is displayed for sale at a grocery store in New York.
Scott Eells | Bloomberg| Getty Images

Goldman Sachs on Monday advised clients to follow a simple investment strategy of buying shares of the companies seeing the biggest increases in earnings estimates from Wall Street analysts.

"One way to think about companies with high positive EPS [earnings per share] revisions is that analysts have consistently underestimated the profit growth potential of these firms," Goldman's chief U.S. equity strategist, David Kostin, wrote in a research note.

Since 2011, companies with positive EPS estimate revisions generated an annual return of 23 percent compared with a gain of 15 percent for the , according to research by the investment bank.

Apart from outperforming the market, these companies also tend to spend those earnings in shareholder-friendly ways.

"Firms with the most consistently positive EPS revisions from 2011 to 2016 bought back more stock and reduced share count by more than the usual S&P 500 company, expanded margins and had more positive sales revisions than the typical firm," said Kostin.

Here are some of the stocks on Goldman's list: