Barron's: Making Another Call, But We'll Pass

In last week's cover story Barron's proclaimed that Facebook shares, which had closed that Friday at $22.86, were worth "perhaps only $15". FB shares promptly fell on Monday. (They did recover nearly all their losses later in the week when Facebook announced a new Gifts-to-friends product, which was not part of the Barron's piece.)

On 9/28 Facebook closed at $21.66, down 5.25% from the previous Friday.

Emboldened by last week's success, Barron's makes another call--this time bullish--on another widely followed company [bold added]:

Based on the likely outlook for capital-markets activity and Goldman [Sach]'s ability to continue growing its book value, it is easy to conclude that the shares could rise at least 25% within a year.

From Friday's close of $113.68, Barron's foresees GS popping to about $142. That target doesn't seem particularly aggressive in that it is well short of Goldman Sachs' peak in 2011:

Barron's does make a persuasive argument. Goldman's conservative market cap (90% of tangible book value), its deleveraging since the 2008 financial crisis, and the 1.6% dividend yield indicate a stock with little downside and much upside, given its leadership position in currently moribund global capital markets.

Goldman Sachs has long been on our watch list but we have never pulled the trigger. The financial sector is one of politics' favorite whipping boys, and Goldman is its most prominent player.

Barron's is probably right about the 25%, but we're just as likely to get that return in tech, commodities, and hard assets without as much headline risk. Pass, for now. © 2012 Stephen Yuen