Goldman reports fantastic and it gets no love in the market. Let me just remind my readers that Goldman earned $8.20 vs. $5.20 per share in 4Q09. They're well on their way to earn $25 in 2010 if you have even a mediocre recovery in the economy. That puts a forward P/E multiple of 6.5x. Even during the worst of financial meltdown when Goldman traded as low as $40 in spring 2009, Goldman never traded below 6x forward multiple.
The only reason for sell-off today is constant negative rhetoric coming out of D.C. I wouldn't be surprised if Goldman gets together with Buffett's of the world to take the company private to stop bashing by our politicians.
From technical standpoint, Goldman's daily chart shows strong support at $157. A close below that could quickly take us to $150. And if we get to $150, the forward P/E will shrink to 5x, a historical low. I don't believe we will see below $150 and I want to take advantage of today's sell-off. I'd love to own Goldman below $150 and with that said, I like the the following Bull Put Spread:
- Buy to open Feb $145 strike puts
- Sell to open Feb $150 strike puts
The trade can be done for a net credit of $1.20, which produces a profit of 24% as long as Goldman stays above $150 by Feb expiration. I like the odds and I love the name. P&L and daily chart are attached for reference.
Good luck!
