IT Most Undervalued Sector: Goldman Sachs

Information technology (IT) is the most undervalued sector in the S&P 500 (INDEXSP:.INX) according to Goldman Sachs’ latest Quarterly Chartbook. “We forecast the S&P 500 will end 2014 at 1900 (+3%), and believe Consumer Discretionary, Industrials, and Information Technology stocks will outperform the index. We expect US GDP growth to reach 3.0%,” the report says.

Goldman found that the implied EPS growth rate for IT has been 6.6% higher than the S&P 500 (INDEXSP:.INX) over the last decade, but its current implied EPS growth rate is just 0.8%. The idea is that implied EPS growth is the level necessary to justify current stock prices, calculated by inverting a two-stage dividend discount model. Since the current rate for IT is significantly less than...