Goldman Sachs prefers Novo Nordisk to stocks dependent on China sales

Slowing growth and rising trade tensions in China are the reasons why Goldman Sachs recommends switching out of the portfolio.
Photo: Andrew Kelly/Reuters/Ritzau Scanpix
Photo: Andrew Kelly/Reuters/Ritzau Scanpix

US investment bank Goldman Sachs recommends investors to sell out of European stocks with an overweight of earnings from China. Instead, companies with large business in the US are highlighted.

Among the top scorers on Goldman Sachs’ list of recommended shares is Danish Novo Nordisk, according to Bloomberg News.

Slowing growth and rising trade tensions in China are the reasons why Goldman Sachs’ recommendations are changing. The US investment bank recommends selling European luxury stocks in particular, as well as companies in the automotive industry, commodities and semiconductors.

”While a large number of downgrades have already taken place this year in our basket of luxury stocks, we are concerned that more could be on the way,” Goldman Sachs strategists led by Lilia Peytavin wrote in a note according to Bloomberg News.

Among the stocks on Goldman Sachs’ blacklist are luxury conglomerate LVMH and cosmetics giant L’Oreal, which have 17 and 21 percent of revenue in China respectively. German car manufacturer Mercedes Benz also appears on the list, as 36% of the company’s revenue comes from China.

On the other hand, golden days are predicted in the US, as a predicted election victory for Donald Trump is expected to strengthen the US dollar and therefore also the stocks recommended by Goldman Sachs, as ”a strong dollar is good for European stocks with US exposure, all else being equal.”

Goldman Sachs particularly recommends healthcare and media stocks. These include the Danish pharmaceutical giant Novo Nordisk, whose sales in the US account for 59% of total revenue. British Pearson and BAE Systems are also recommended.

The stocks are ”likely to fare well in the event of a punitive tariff escalation as a majority of the companies have direct operations in the US,” Goldman Sachs’ strategists argue.

English edit: Catherine Brett

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