Goldman Sachs is encouraging clients to buy shares of companies with organic sales growth ahead of the first quarter earnings season and not ones with numbers possibly inflated by the tax cut.
"We recommend investors focus on organic growth reflected in sales and pre-tax margins, rather than the tax cut-assisted EPS growth," wrote David Kostin, Goldman's top equity strategist. "Consensus forecasts double-digit sales growth in energy, information technology, and materials. Strong top-line growth is consistent with solid economic activity in the first quarter."
The bank's chief equity strategist told clients to expect solid S&P 500 sales growth of 10 percent, the fastest pace since 2011.
A weaker U.S. dollar should also buoy revenues, the strategist added, as a weaker greenback typically promotes exports and better-than-average sales beats.