In a note to investors last week, Goldman Sachs said that its basket of "weak” balance-sheet stocks outperformed a peer group with "strong" balance sheets by 49 percentage points during the past two years. During that period, technology stocks accounted for more than half the outperformance of weak balance-sheet stocks.
Goldman says it believes the trend is likely to continue based on improving U.S. economic data, strong credit markets and where we are in the current market cycle.
By sector, only energy stocks with strong balance sheets have outperformed their counterparts.
The firm uses Altman Z-scores to measure balance sheet strength.
