Goldman Sachs Conviction Buy List Update ~ market folly

Friday, October 3, 2008

Goldman Sachs Conviction Buy List Update

Yesterday (10/2), Goldman Sachs (GS) was out making some changes to its esteemed conviction buy list. They removed Freeport McMoran (FCX) from the list, but still reiterated a normal 'buy' rating on the name. Additionally, they have added Suncor (SU) to the list.

Copper mining giant Freeport McMoran (FCX) hit a new 52-week low of $45.17 yesterday as it continues to get obliterated. Just a few months back, it was trading as high as $125. Nowadays, amidst the commodity sell-off, deleveraging, and hedge fund redemptions, FCX is getting no love. Its valuation is borderline absurd, trading at around a 5 trailing PE and a 3.9 forward PE. But, valuation got thrown out a long time ago in this market environment. Hedge fund giants such as Timothy Barakett's Atticus Capital and Philip Falcone's Harbinger Capital had massive positions in FCX as of their most recent respective 13F filings with the SEC. Undoubtedly, the decline in FCX's share price has hit these funds hard. And, they most likely have been contributing to the selling. Last time we checked various hedge fund's year-to-date performances, Atticus was down 25% for the year and Harbinger, after being up 42% for the year, now finds themselves up only 2% (more numbers here). You can view Atticus' portfolio holdings here and Harbinger Capital's portfolio holdings here. Additionally, you can read more about Harbinger's exploits here.

Suncor (SU), on the other hand, was being added to the conviction buy list as shares continued to tumble. SU has fallen from a high of $73 to current levels of $33. Canadian Oil Sands giant Suncor (SU) is owned by numerous hedge funds, including legendary oil maverick T. Boone Pickens' BP Capital. And, as you can imagine, the share price depreciation in SU has affected Boone's portfolio in a negative way. Although not the sole reason for his funds' decline, Boone still finds himself down $1 billion for the year. You can view all of T. Boone Pickens' BP Capital equity holdings here.

Source: StreetInsider 1, 2

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