For investors looking for ways to beat the market after a stellar year, Goldman Sachs is touting portfolios with the highest expected risk-adjusted returns. The bank advises its clients to focus on stocks with high Sharpe ratios, a measure of an asset’s performance relative to volatility. The company expects the median stock in its 50 high Sharpe ratio basket to generate a 26% return over the next 12 months, nearly four times the 7% expected return for the median S&P 500 stock. . “Our high Sharpe ratio basket contains stocks that provide the best risk-adjusted returns,” David Kostin, Goldman’s chief U.S. equity strategist, said in a note to clients on Friday. “Our basket typically trades in value Tilt to trade as it typically includes stocks with significant price declines. Goldman Sachs measures the Sharpe ratio using consensus 12-month price targets and option 6-month implied volatility. The total return for a 50-stock portfolio was 29%, in line with the S&P 500 Index. The basket also has a track record of outperforming, Goldman Sachs said. Since 1999, it has outperformed the equal-weighted S&P 500 by 100 basis points and outpaced the regular cap-weighted S&P 500 by 220 basis points. Google parent Alphabet is in the portfolio, along with casino operators MGM Resorts and Caesars Entertainment. Stocks in Goldman’s high Sharpe ratio basket also include consumer stocks Coca-Cola and Constellation Brands, as well as Devon Energy and Uber Technologies. —CNBC’s Michael Bloom contributed reporting.
Goldman Sachs predicts these stocks will return 4 times the return of typical stocks | Real Time Headlines
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