Goldman Sachs is a no brainer buy at $240 a share

It is hard to find inexpensive shares in an inflated market that also happen to be beneficiaries of the global pandemic. Goldman Sachs (GS), arguably the most powerful investment bank in the world, trades at 1.1 times tangible book value and 10 times earnings even though it earned $40 in EPS in the last six months. This means Goldman at 240 is a no brainer buy for me. Why?

One, the bank paid $2.9 billion to settle the horrific 1MDB scandal in Malaysia that gutted its reputation on Wall Street and led to partner Tim Leissner pleading guilty for money laundering. 1MDB was a sword of Damocles on GS but litigation risk is now over.

Two, Goldman earned a stellar 17.5% ROE in 2020, thanks to the biggest earnings jackpot in its history since the pandemic began. Principal investing in equities/private credit led to a $1.2 billion profit. The tech IPO boom in Silicon Valley meant blowout success in equities capital markets and debt underwriting benefited from the plunge in credit spreads. Global M&A is on fire and Goldman dominates the league tables in Eurobonds, high yield and MBS.

Three, steepening of the US Treasury yield curve is hugely bullish for Goldman's fixed income, prop trading and principal lending businesses.

Four, Marcus, the GS online consumer bank boasts $100 billion in deposits but delivered lower credit losses.

Five, GS will easily pass the Federal Reserve's capital adequacy stress test and will be allowed to resume share buybacks as well as raise its dividend. The current div yield is 2.4%.

Six, as crude oil and Dr. Copper prove, commodities are on a roll and GS's J-Aron unit is the best commodities shop on the Street. J. Aron once spawned King Lloyd and will be a money gusher in 2021.

Seven, CEO David Solomon has engineered a more stable revenue mix for a bank once derided as the biggest NYSE listed hedge fund on the planet. The bank's investment in GSAM and fintech via the Apple deal argues for a valuation rerating.

Eight, volatile capital markets are correlated with epic FICC revenues and GS is to financial engineering what Picasso and Braque were to Cubist art. 2021 will be no exception.

Nine, GS has pledged to reduce its operating cost by $1.2 billion in the next three years. This is uber bullish for GS margins.

Ten, GS has hired thousands of software engineers to accelerate its digital transformation and Solomon's focus on board diversity/women and ESG issues will resonate in a Biden's White House. Note Ex Trumpster Gary Cohn has refused to return his share of the bonus millions he earned despite the 1MDB looting scandal.

Eleven, Abu Dhabi SWF Mubadala has dropped its GS blacklist related to the sordid events in Malaysia. This is hugely bullish for GS's extensive Gulf franchise based in the DIFC.

I had dozens of Wharton classmates who ended up working at GS as either traders or I-bankers at 80 Whitehall death star HQ in Lower Manhattan and its temple of money in London's Peterborough Court in the Strand. Jim O'Neill, the former GS chief economist and later GSAM chairman who coined the term "BRICS" is a good friend.

I believe some of my most brilliant friends in life are ex GS bankers or traders. This bank should be trading at at least 1.8 times tangible book value and 13 times earnings, which just happens to be J.P. Morgan's current valuation metric. Will this happen in 2021? No but the rerating will begin. I believe GS is now a compelling buy at its current 240 for a 320 target. This is not an 80% sizzler like my Invesco (IVZ) idea but has the potential to make serious money with minimal heartache, the rationale for Matt's real time risk/reward calculus.

Legendary GS partner Gus Levy used to ask his bankers to be long term greedy, I ask the same from my cherished friends who follow me on LinkedIn.