Goldman Sachs says to buy these 29 stocks poised to deliver the strongest sales growth through year-end

By Vicky Ge Huang

A week into 2021, all eyes on Wall Street are on the growth prospects of the year ahead.

Will the economic recovery and reopening proceed as predicted? Will the much-anticipated reflation trade pan out as expected? A lot of it is riding on the smooth distribution of COVID-19 vaccines and whether it would deliver the projected economic impact, according to Goldman Sachs. 

However, the US on Friday posted a surprise 140,000 payroll decline in December, marking "a stark reminder that the virus is still a very significant depressant on economic activity," Goldman's Chief Economist Jan Hatzius said in a Friday "Exchanges at Goldman Sachs" podcast

That being said, Hatzius pointed out that the recent job losses are concentrated in the hospitality and leisure sector, which is sensitive to the virus, especially in the winter when outdoor dining is less likely to happen. 

In addition, following the Democratic wins of the Georgia Senate run-offs last week, Goldman is expecting to see $750 billion of more fiscal stimulus on top of the recently passed $900 billion package. The prospect of higher fiscal spending is expected to lead to faster economic growth but also higher inflation and interest rates, the bank said in a Monday client note.

"While the economy is going through a much slower stretch, it is sort of holding up and it's not as sensitive to virus and restrictions as was the case earlier in 2020, especially in the spring," Hatzius said. "As we get into the spring, beyond January and February, we are expecting a strong recovery."

Hatzius' GDP forecast for 2021 remains 6.4%, more than two percentage points above the consensus of forecasters.

Unsurprisingly, in this projected environment, it is the companies that can take advantage of the pent-up consumer demand and grow their sales that stand apart. 

Using data from FactSet, Goldman's portfolio strategy research team screened the S&P 500 for the 100 largest stocks ranked by their expected sales growth in 2021. They excluded the financials, real estate, and utilities sectors.

Overall, the energy sector is expected to generate 15% sales growth by year-end. The communications services sector is expected to grow sales by 14%, while the consumer discretionary sector is anticipated to finish the year with 13% sales growth.

Sales for the S&P 500 overall are expected to land at 9%, while the information technology (8%), materials (7%) and healthcare (6%) sectors experience similar single-digit sales growth.

The 29 stocks are ranked below from lowest to highest based on their expected sales growth through year-end.