The chief U.S. equity strategist for Goldman Sachs, David Kostin, suggests that focusing on stocks with high projected earnings growth would be a sound strategy for investors in 2020. It has identified the 100 stocks in the S&P 500 Index that are expected to show the highest percentage earnings growth in the index.

Key Takeaways

  • The list includes the 100 stocks that are expected to deliver the biggest year-over-year gains.
  • The full range of sectors is covered, from information technology to energy.
  • Overall, average earnings growth of 9% is expected for S&P 500 companies in 2020.

Goldman's Top 10

Drawing upon data from FactSet Research Systems, Goldman lists the 100 stocks in the S&P 500 Index that are expected to deliver the largest year-over-year percentage increases in earnings per share (EPS) during 2020, based on consensus analyst estimates. Stocks in all 11 sectors of the S&P were included.

The top 10 in terms of projected 2020 EPS growth rates are as follows:

  1. Charter Communications Inc. (CHTR): 88%
  2. Netflix Inc. (NFLX): 63%
  3. ExxonMobil Corp. (XOM): 39%
  4. Facebook Inc. (FB): 36%
  5. Bristol-Myers Squibb Co. (BMY): 34%
  6. Adobe Inc. (ADBE): 27%
  7. Amazon.com Inc. (AMZN): 26%
  8. Nvidia Corp. (NVDA): 26%
  9. Fiserv Inc. (FISV): 26%
  10. Qualcomm Inc. (QCOM): 24%

The Message for Investors

The projected 2020 average EPS growth rate of 9% for the entire S&P 500 would be a major improvement over the 0% actual growth rate for 2019, based on current estimates.

Looking at sectors, those expected to do better than the index include energy, at 19%; materials, 16%; industrials, 14%; consumer discretionary, 13%; real estate, 12%, and information technology, 10%.

Expected 2020 earnings growth may already be factored into the prices of these stocks

In 2019, Goldman notes, information technology beat the S&P 500, as did communication services and financials.

The 10 stocks that are expected to lead in terms of 2020 EPS growth represent a number of industries. Bristol-Myers Squibb is a drug maker. Abobe is a software provider. Facebook is a social media company with properties that include Instagram, Messenger, and WhatsApp as well as the flagship site. It even sells the Oculus 3D glasses used by video game players.

In addition, there's Netflix, a video streaming subscription service, and Charter Communications, which offers TV, Internet, and voice services under the Spectrum brand.

ExxonMobil is an oil exploration, refining, and distribution company. Nvidia and Qualcomm are semiconductor manufacturers. Amazon.com is an online retailer and provider of cloud computing services. Fiserv is a financial services technology company with applications in payment processing.

Looking Ahead

All financial forecasts come with warning notes attached, or they should.

In this case, the projections are based on consensus estimates that will already be known to many investors. The big boosts anticipated for these stocks in 2020 may already be priced into their stocks.

If so, any earnings disappointments will probably send their shares tumbling.