The US stock market is starting to strike some observers as overvalued. For the past three years, it has brought in double-digit returns, and the sustained bullish run has prompted some use of the ‘b’ word, bubble. But a new report from Goldman Sachs, analyzing the situation, suggests that investors should stay the course with US stocks.
Sharmin Mossavar-Rahmani, the firm’s CIO for Consumer and Wealth Management, acknowledges that valuations are high, perhaps even echoing the burst of the doc.com bubble 20 years ago, but says, “Using valuation as a signal to get out of equities is actually not effective.”
She points out that the S&P 500 index, over the past several years, has generated a 133% return, and rallied in 2021 despite already high valuations. In her view, investors will risk missing out on additional gains if they let the bubble worries get the better of them. And finally, despite a superficial similarity to the market collapse of 2000, Mossavar-Rahmani points out, “This bull market has not been driven by only a handful of stocks. Returns were much more skewed in 1999 than in 2021.”
The firm’s stock analysts are running with that call, pointing out equities they see as winners in the current environment. In the Goldman view, these stocks have better than 40% upside in store for the year ahead. Let’s see how that stacks up with the latest TipRanks data.
Thoughtworks Holding (TWKS)
The first stock on Goldman Sachs’ radar is Thoughtworks, a digital tech consulting company. This agency helps its clients respond to changing business conditions, mine the best value out of data assets, develop adaptable tech platforms, and deliver high-end digital products and experiences. Thoughtworks has been at the forefront of digital consulting for nearly 30 years, and at the end of last summer the company held its IPO.
The initial offering saw the company put over 16.4 million shares on the market at $21 each. That was above the expected pricing of $18 to $20. Thoughtworks raised a $344 million in the IPO, and today the stock commands a market cap of $6.8…