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Investors should focus on large-cap stocks with the highest prospective risk-adjusted returns, according to strategists at financial-services firm Goldman Sachs. They revised their basket of stocks with a high Sharpe ratio – a comparison of how well a stock performs in relation to a risk-free investment such as U.S. Treasuries – to include 39 new stocks.
“The median stock in the rebalanced basket has returned -2% year-to-date, compared with a 19% gain for the typical stock in the S&P 500 (SP500),” David Kostin, strategist at Goldman Sachs, said in a December 6 report. “However, looking forward, the median constituent is expected to generate nearly four times the return of the median S&P 500 stock during the next 12 months.”
| Constituents of High Sharpe Ratio Basket – Goldman Sachs, December 6 | ||
| *New constituent | ||
| Company (ticker) | Expected return/implied volatility | |
| News Corp. (NWSA) | 0.9 | * |
| Alphabet Inc. (NASDAQ:GOOGL) | 0.7 | * |
| Comcast Corp. (CMCSA) | 0.5 | |
| Omnicom Group (OMC) | 0.5 | |
| Paramount Global (PARA) | 0.5 | * |
| MGM Resorts (MGM) | 1.0 | |
| LKQ Corp. (LKQ) | 1.0 | |
| Caesars Entertainment (CZR) | 1.0 | * |
| Aptiv (APTV) | 0.9 | * |
| BorgWarner Inc. (BWA) | 0.7 | * |
| Mondelez International (NASDAQ:MDLZ) | 1.3 | |
| Coca-Cola Co. (KO) | 1.1 | * |
| Constellation Brands (STZ) | 1.0 | * |
| Devon Energy Co. (DVN) | 1.3 | * |
| Schlumberger Ltd. (SLB) | 1.2 | |
| Arch Capital Group (ACGL) | 0.9 | * |
| Intercontinental Exchange (ICE) | 0.8 | * |
| Globe Life Inc. (GL) | 0.7 | * |
| S&P Global Inc. (SPGI) | 0.7 | * |
| Everest Group (EG) | 0.6 | * |
| Berkshire Hathaway (BRK.B) | 0.6 | |
| MarketAxess Holdings (MKTX) | 0.5 | * |
| Biogen Inc. (NASDAQ:BIIB) | 1.5 | * |
| Becton, Dickinson (NYSE:BDX) | 1.3 | * |
| Regeneron Pharmaceuticals (REGN) | 1.2 | * |
| Centene Corp. (CNC) | 1.2 | |
| Elevance Health (ELV) | 1.1 | * |
| Uber Technologies (UBER) | 1.0 | * |
| General Dynamics (GD) | 1.0 | * |
| Xylem Inc. (XYL) | 0.9 | * |
| Leidos Holdings (LDOS) | 0.8 | * |
| Microchip Technology (MCHP) | 1.1 | * |
| Monolithic Power Systems (MPWR) | 1.0 | * |
| CDW Corp. (CDW) | 0.9 | * |
| Micron Technology (MU) | 0.9 | * |
| First Solar Inc. (FSLR) | 0.8 | * |
| Qualcomm Inc. (QCOM) | 0.8 | * |
| Qorvo Inc. (QRVO) | 0.7 | * |
| Applied Materials (AMAT) | 0.7 | * |
| Synopsys Inc. (SNPS) | 0.7 | * |
| Advanced Micro Devices (AMD) | 0.7 | * |
| ON Semiconductor (ON) | 0.7 | |
| KLA Corp. (KLAC) | 0.7 | * |
| Seagate Tech Holdings (STX) | 0.7 | * |
| Western Digital (WDC) | 0.7 | |
| Teledyne Technologies (TDY) | 0.6 | |
| NXP Semiconductors (NXPI) | 0.6 | * |
| Dow Inc. (DOW) | 1.2 | * |
| Healthpeak Properties (DOC) | 0.8 | * |
| AES Corp. (AES) | 1.2 | * |
| Goldman Sachs Basket median | 0.8 | |
| S&P 500 (SP500) median | 0.3 | |