Interest rates appear to have peaked, and growth stocks are an area worth looking at right now, according to Goldman Sachs. “As interest rates appear to have peaked, Pure Growth … offers exposure to duration while Stable Growers … is more defensive,” the investment bank wrote in a December note. Last week, the U.S. Federal Reserve indicated there will be three cuts coming in 2024 , ending a cycle of 11 hikes. Rate hikes have not usually been good for growth stocks. Goldman did two stock screens for its so-called pure growth and stable grower categories. ‘Pure growth’ Goldman screened for companies in the Stoxx 600 ex-financials index using several criteria, including the following: Highest 2023-2025 sales compound annual growth rate. Excluding companies with sales growth below the Stoxx’s bottom quartile in the last three years. Tech stocks make up 20% of the stocks, health care 16%, and industrial goods and services 14%. These stocks turned up in Goldman’s basket. Stable growers Goldman screened for companies in the Stoxx 600 ex-financials index. It looked for companies with a standard deviation of sales growth that is below the 50th percentile and sales growth likely to be more than the 30th percentile over 20 years (from 2006 to 2025). Industrial goods and services make up 20% of the stocks, while 17% of them come from health care and 11% from technology. These stocks turned up in Goldman’s basket. — CNBC’s Michael Bloom contributed to this report.
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