Goldman Sachs Says These 7 Stocks With Strong Balance Sheets Could Be Big Winners In 2021

Looking for safety and growth? Goldman Sachs has a 50 stock basket for you. Here are 7 stocks that have recently been added to it.

2020 has been a wild year for the market and investors seeking safety have been flocking to stocks with strong balance sheets.

But they also want growth, and Goldman Sachs (NYSE: GS) said this week that improving economic conditions in 2021 should support companies with strong balance sheets that are investing for future growth.

“Investors will reward companies investing for growth in 2021,” said Goldman analyst Ryan Hammond, said in a note, adding that the companies with “the strongest balance sheets and firms spending the most on cash mergers and acquisitions” will likely be clear winners.

So far this year, Goldman’s basket of 50 companies with strong balance sheets is up 26%, making it the firm’s best-performing thematic strategy, Hammond said.

“In contrast with history, many of the strongest balance sheet stocks are also the fastest-growing firms,” Hammond wrote in the note. “The basket has also dislocated from traditional measures of solvency risk such as credit spreads, suggesting that investors are seeking the cash flow flexibility and growth—rather than just the safety—of strong balance sheets.”

While Hammond noted that the group has historically traded roughly in line with the market, things have been different recently with companies spending the most on M&A outperforming the S&P 500 since the beginning of last year. 

As for next year, the firm anticipates economic activity will pick up, which, alongside a slightly weakening dollar, should continue to support such a corporate strategy.

“During reflationary environments, companies investing for growth (capex and R&D, M&A) have typically outperformed,” Hammond said, leading him to recommend stocks that the firm ranks highly for the quantity and quality of their spending, especially heading into the new year.

New additions to the strong balance sheets basket include surprising names like Carnival Corp (NYSE: CCL), Norwegian Cruise Line Holdings (NYSE: NCLH), and Royal Caribbean (NYSE: RCL), which could see a resurgence next year as travel restrictions are lifted as the coronavirus pandemic eases. 

Also new to the list are Boeing (NYSE: BA), which should be helped by the same reason, car auction company Copart (NASDAQ: CPRT), diabetes blood sugar monitor company Dexcom (NASDAQ: DXCM), and hard disk drive manufacturer Western Digital (NASDAQ: WDC).


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