Goldman: These 10 innovative companies spending big on R&D will beat the market

A technician prepares a flow cell slide for loading onto a genetic sequencing machine at a Regeneron Pharmaceuticals laboratory in Tarrytown, N.Y.
Mike Segar | Reuters

Goldman Sachs told clients to buy shares of companies leading the way in innovation, as historical trends show a positive correlation between stock price returns and spending on research and development.

"We view R&D spend as a way by which to gauge a company's focus on product and process innovation to adapt in an ever evolving competitive landscape," wrote Robert Boroujerdi, Goldman's head of Americas equity research, in a note Tuesday.

"Specifically, we find a strong correlation between R&D spend and gross profit growth, which is ultimately a key driver of stock price performance," he said.

By analyzing a group of Russell 1000 companies with significant research and development investments since 2005, Boroujerdi was able to quantify how much in excess returns those companies were able to generate.