David Kostin at Goldman Sachs says investors should buy stocks that return a lot of cash. Kostin also says that companies with higher capex rates will have a more difficult time.
Goldman Sachs is part of that consensus, and the firm expects the S&P 500 index to slip to 4,000 sooner rather than later. Chief US Equity Strategist David Kostin wrote in a recent note to clients that investors should focus on total returns in the form of dividends and stock repurchases, in addition to stock price appreciation., he wrote that companies that return cash to their shareholders will become appealing investments in the months to come.
The opposite has happened over the first few months of 2023, as high-growth stocks — which generally plow more money into their businesses — have outperformed. That was a reversal of what happened in 2022, when growth names were crushed."We expect capex spending to slow in 2023, representing a headwind to capex-exposed stocks," he wrote.
Kostin wrote that he expects dividends to grow 5% in 2023, while buybacks are cut by 10%, which indicates to Kostin and his team that dividend-paying companies will have an easier road ahead.
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