Value Investing from the Goldman Sachs Chief Investment Officer

Eileen Rominger, the Chief Investment Officer at Goldman Sachs, told Fortune magazine how she, as a value investor, ranks companies.  She had a very good answer.  It’s a sound process.

Eileen Rominger: There are two components.  We believe in using industry-specific approaches to valuation.  So we don’t just use price/earnings, for example.  If we’re going to buy an energy company, we’ll look at enterprise value to reserves and then do a lot of work identifying where the reserves are.

The other things I that we look for “emerging quality” stocks – companies where there’s a kernel of something good, but it’s not evident to the naked eye and we think we’ve assessed it earlier than others.  An example would be Dow Chemical.  We think that it has significant positive catalysts – such as better cash flow and an improving balance sheet – which aren’t yet fully recognized by the market.

Related posts:

1. Aaron Convinced Me to Shut Down the Coupon Index Fund and Instead Open a Joint Global Investment Account Following the Same Value Investing System We Use at the Company
2. Value Investing vs. Growth Investing
3. Walter Schloss Value Investing Strategy
4. Charlie Munger Value Investing Strategy
5. Benjamin Graham Value Investing Strategy
6. Using Cash to Increase Your Value Investing Returns
7. Bill Ruane Value Investing Strategy
8. Not Every Value Investing Position Is “Buy and Hold”
9. Focused Value Investing Strategy
10. Our Value Investing Research Process for Stocks