- Wide-reaching corporate tax cuts have stock investors wondering which companies will benefit most.
- Goldman Sachs (NYSE:GS) has singled out 16 companies as offering the most reinvestment growth, a characteristic of companies that have historically outperformed the market.
How does an investor decide which companies are poised to benefit most from sweeping tax cuts that affect nearly everyone? Listen to Goldman Sachs, of course.
The firm has developed an index of stocks called the High Growth Investment Ratio Basket, which is designed to include companies whose share price is most likely to get a boost from the new tax law, given their past use of excess capital.
Goldman's basket includes not just the companies that have most heavily reinvested money into capital expenditures and research and development, but also those set to generate the highest return on it.
For context, the median stock in the index has reinvested 81% of its trailing three years of cash flow from operations, compared with just 13% for the average S&P 500 company, according to Goldman. The firm also forecasts that basket members will offer 18% cash return on capital invested, compared with just 12% for the broader benchmark.
Without further ado, here are the 16 stocks that best fit the bill, arranged in increasing order of three-year growth investment ratio:
16. Wynn Resorts
Ticker: WYNN
Industry: Consumer discretionary
Year-to-date return: -2%
Three-year growth investment ratio: 101%
15. CF Industries
Ticker: CF
Industry: Materials
Year-to-date return: +2%
Three-year growth investment ratio: 104%
14. Amazon (NASDAQ:AMZN)
Ticker: AMZN
Industry: Consumer discretionary
Year-to-date return: +27%
Three-year growth investment ratio: 104%