Goldman Sachs (NYSE:GS) filed the form 10-Q detailing its performance over the first 3 months of the year with the SEC on Thursday. And a striking piece of information that stands out from the filing is the fact that the global investment bank’s trading business lost money on just one day over the entire quarter – something that was last seen in the extremely profitable first quarter of 2011. No wonder the bank reversed the poor trading results it ended up over the second half of 2011. An improved global economic environment gave trading operations for Goldman and its competitors including Morgan Stanley (NYSE:MS) and Barclays (NYSE:BCS) a leg-up in Q1 2012.
We maintain a $128 price estimate for Goldman’s stock, at a premium of about 17% to current market prices.
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Our analysis of Goldman Sachs attributes just under half of its total value to its trading operations – including both debt and equity trading. And the dismal Q3 and Q4 2011 results was almost completely because of significant trading losses. Goldman’s expertise in the business did not help it much in the extremely volatile markets.
The following graph shows the net revenues that Goldman’s trading division roped in each day over Q1 2012.
As seen above, Goldman’s trading activities lost money on a single day over the quarter, and the loss was also under $25 million. Notably, this is a loss on one day in 62 trading days. And the bank also earned more than $100 million on 24 days.
In contrast, the bank had a trading loss on 21 days out of 64 trading days in Q3 2011, and on 17 out of 65 trading days in Q4 2011.