Goldman Sachs Selects Several Small-Cap Stocks, with price power, necessary for that, to weather strong inflation.
Pricing strength describes impact, which price change has on the demand for a particular product. A company with strong pricing power and a unique value proposition should be able to raise the price of a product, without reducing the demand for this product.
“Rising resource costs, supply chain problems remain top concerns for corporations and investors. ", – states Goldman .
"In particular, according to our team, Russell labor costs are 16% from total revenue, and for S&P 500 – 11% , making them more vulnerable to wage increases ”.
Russell 2000, index 2000 small cap companies, overtook S&P 500 almost on 6% from mid-August, noted by Goldman, amid rising yields on US Treasury bonds for 10 years and oil prices – macroeconomic changes, which have historically supported small-cap stocks.
Goldman singles out companies with a Buy rating, That, as analysts expect, will have strong price power and operating leverage up to 2022 of the year.
- The Goldman list includes many energy and industrial companies, such as Kosmos Energy $ KOS, Gates Industrial, Herc Holdings, Avient и Evoqua Water Technologies
The energy business is growing worldwide The energy business is growing worldwide
Wingstop – the only restaurant on the list, and expected, that his gross profit will increase to 81% this year and in 2022 year since 80% in 2020 year.
Expected, that Green Plains, ethanol producer, will see one of the largest increases in gross profit. Goldman expects to see 14% by next year compared to 2% in 2019 year.