The long-term track record of Goldman Sachs (GS) stock since its IPO more than 25 years ago is quite impressive. Given the cyclicality of their business, over the years I have closely monitored the share price relative to underlying book value to help identify periods where opportunistic buying was worth considering. As you can see below, in the past whenever the stock has dipped below - or at least come within striking distance of book value - the shares have been a screaming buy.
With the political environment having become more friendly to business during 2025, the IPO market is perking up a bit, as has M&A activity. So from a fundamental standpoint, GS’s business momentum should be accelerating right now. Interestingly, the stock performance has not only reflected that expectation lately (as one would expect since the market is a discounting mechanism), but it actually appears to be quite overbought based on historical trendlines.
As a result, while I expect the company to post impressive sales and earnings figures in late 2025 and into 2026, the stock price might lag a bit given that it is already pricing in a ton of future good news. I think it is worth sharing this graph now, given just how wide the gap with book value has become. For clients with large positions purchased back in 2022 or even earlier, I am keen on trimming back our holdings a bit into the recent strength, for no other reason that the above data.
