Goldman Sachs (NYSE:GS) is betting on individual stocks to outperform this earnings season, predicting a year of heightened stock-picking opportunities.
The investment bank released its annual "Top 25 Tactical Trades" note, highlighting companies where its analysts anticipate significant earnings surprises.
"We believe 2024 will be remembered as the '"Year of the Stock Picker'," Goldman Sachs noted.
The firm expects upward earnings revisions to drive upside in 17 stocks, including Allstate (NYSE:ALL), Chipotle Mexican Grill (NYSE:CMG), Enphase Energy (NASDAQ:ENPH), Fox Corporation (FOXA), Microsoft (NASDAQ:MSFT), and Teradyne (NASDAQ:TER). Conversely, Goldman anticipates downward earnings revisions for eight names, such as Lazard (NYSE:LAZ) and Boston Beer Company (NYSE:SAM).
While single stock options volumes have recently declined, suggesting decreased investor enthusiasm, Goldman believes hedge funds may increase short positions in fundamentally weak companies.
The bank's proprietary model indicates that both upside and downside potential for the S&P 500 is currently undervalued by options markets. Despite this, Goldman's analysts forecast a more modest 9% upside for the average S&P 500 stock over the next 12 months compared to the previous quarter's estimate.