Goldman's Conviction Buy List Has an Equally Sinister Cousin (NYSE: GS)

Don't trust investment advice from Goldman Sachs Group Inc. (NYSE: GS).

The banking giant often bestows its "wisdom" on retail investors with such vehicles as Goldman's Conviction Buy List, as well as its quarterly chartbook updates.

But although Goldman carries a lot of weight on Wall Street (probably too much), it often sprinkles these tidbits around with the intent to mislead.

In the past, Money Morning has looked at several Goldman transgressions that show just how dangerous it can be. Such antics as the "warehouse shuffle" and the manipulation of gold prices are designed to earn Goldman profits at everyone else's expense.

That's how Goldman Sachs earned the nickname "Vampire Squid."

But the average investor needs to be especially wary of Goldman's stock advice. Remember, this is the place that referred to its clients as "Muppets" back in 2012.

Goldman's Conviction Buy List is the bank's most high-profile form of stock advice to the masses. Whenever a stock is added or dropped to the Conviction Buy List, it makes news.

Why the Conviction Buy List Is Dangerous

Of course, the Goldman Conviction Buy List is also notoriously wrong.

Back in April 2013, when Goldman removed Apple Inc. (Nasdaq: AAPL) from the Conviction Buy List, Money Morning documented its suspiciously poor performance.

Apple stock remained on the Conviction Buy List through nearly all of a 40% decline. After Goldman removed AAPL from the Conviction Buy List, the stock shot up 120%.

But the Conviction Buy List is not the only source of bad stock advice from Goldman Sachs. The less visible recommendations from its quarterly chartbook are even more treacherous.

The quarterly chartbook recommendations derive from Goldman's one-year price targets. Each quarter, Goldman's Chief U.S. Equity Strategist, David Kostin, will publish an update to its outlook. The stocks with the greatest potential gains from their current price are touted (with the help of the mainstream financial media) as the "most oversold stocks."

Here's why investors who buy stocks based on the Goldman chartbook soon regret it...

Stock Picks That Fare Worse Than the Conviction Buy List

The primary sin of the Goldman Conviction Buy List is that it's a lagging indicator. Goldman leaves stocks on the list while they're plummeting and adds stocks after the biggest gains have already happened.

But the "oversold" stocks from the quarterly chartbook are out-and-out losers. Of the 40 stocks Goldman labeled the most oversold as of Dec. 31, 2014, 70% are underperforming the market. (The Standard & Poor's 500 is down 4.21% on the year.)

Some of these stocks are down 40% or more.

See for yourself:

(All figures use Monday's close. Winners need only have beaten the S&P 500's year-to-date performance.)

Range Resources Corp. (NYSE: RRC)
Goldman's Prediction: +49.7%
YTD Performance: -27.75%
Versus the S&P 500: -23.54%
Verdict: LOSER

CONSOL Energy Inc. (NYSE: CNX)

Goldman's Prediction: +42%

YTD Performance: -54.95%

Versus the S&P 500: -50.74%

Verdict: LOSER

Keurig Green Mountain Inc. (Nasdaq: GMCR)

Goldman's Prediction: +39.7%

YTD Performance: -57.25%

Versus the S&P 500: -53.04%

Verdict: LOSER

Alcoa Inc. (NYSE: AA)

Goldman's Prediction: +39.3%

YTD Performance: -40.15%

Versus the S&P 500: -35.94%

Verdict: LOSER

Southwestern Energy Co. (NYSE: SWN)

Goldman's Prediction: +39.2%

YTD Performance: -40.53%

Versus the S&P 500: -36.32%

Verdict: LOSER

Noble Energy Inc. (NYSE: NBL)

Goldman's Prediction: +39.2%

YTD Performance: -29.56

Versus the S&P 500: -25.35

Verdict: LOSER

Wynn Resorts Ltd. (Nasdaq: WYNN)

Goldman's Prediction: +39.2%

YTD Performance: -49.55%

Versus the S&P 500: -45.34%

Verdict: LOSER

Cabot Oil & Gas Corp. (NYSE: COG)

Goldman's Prediction: +38.5%

YTD Performance: -20.6%

Versus the S&P 500: -16.39%

Verdict: LOSER

Delta Air Lines Inc. (NYSE: DAL)

Goldman's Prediction: +38.2%

YTD Performance: -11.02%

Versus the S&P 500: -6.81%

Verdict: LOSER

General Motors Corp. (NYSE: GM)

Goldman's Prediction: +34.6%

YTD Performance: -15.7%

Versus the S&P 500: -11.49%

Verdict: LOSER

Tesoro Corp. (NYSE: TSO)

Goldman's Prediction: +34.5%

YTD Performance: +23.82%

Versus the S&P 500: +28.03%

Verdict: WINNER

Phillips 66 (NYSE: PSX)

Goldman's Prediction: +33.9%

YTD Performance: +10.28%

Versus the S&P 500: +14.49%

Verdict: WINNER

Freeport-McMoRan Inc. (NYSE: FCX)

Goldman's Prediction: +32.7%

YTD Performance: -54.45%

Versus the S&P 500: -50.24%

Verdict: LOSER

Pioneer Natural Resources (NYSE: PXD)

Goldman's Prediction: +32.3%

YTD Performance: -17.33%

Versus the S&P 500: -13.12%

Verdict: LOSER

Netflix Inc. (Nasdaq: NFLX)

Goldman's Prediction: +31.7%

YTD Performance: +135.72%

Versus the S&P 500: +139.93%

Verdict: WINNER

Simon Property Group Inc. (NYSE: SPG)

Goldman's Prediction: +31.2%

YTD Performance: -1.53%

Versus the S&P 500: +2.68%

Verdict: WINNER

Tenet Healthcare Corp. (NYSE: THC)

Goldman's Prediction: +30.3%

YTD Performance: -2.84%

Versus the S&P 500: +1.37%

Verdict: WINNER

Southwest Airlines Co. (NYSE: LUV)

Goldman's Prediction: +30%

YTD Performance: -13.28%

Versus the S&P 500: -9.07%

Verdict: LOSER

Hasbro Inc. (Nasdaq: HAS)

Goldman's Prediction: +27.3%

YTD Performance: +35.64%

Versus the S&P 500: +39.85%

Verdict: WINNER

Tyson Foods Inc. (NYSE: TSN)

Goldman's Prediction: +27.2%

YTD Performance: +5.46%

Versus the S&P 500: +9.67%

Verdict: WINNER

Michael Kors Holdings Ltd. (NYSE: KORS)

Goldman's Prediction: +26.5%

YTD Performance: -42.13%

Versus the S&P 500: -37.92%

Verdict: LOSER

PACCAR Inc. (Nasdaq: PCAR)

Goldman's Prediction: +25%

YTD Performance: -13.29%

Versus the S&P 500: -9.08%

Verdict: LOSER

salesforce.com Inc. (Nasdaq: CRM)

Goldman's Prediction: +24.8%

YTD Performance: +16.94%

Versus the S&P 500: +21.15%

Verdict: WINNER

Hess Corp. (NYSE: HES)

Goldman's Prediction: +24.6%

YTD Performance: -19.47%

Versus the S&P 500: -15.26%

Verdict: LOSER

Amgen Inc. (NYSE: AMGN)

Goldman's Prediction: +23%

YTD Performance: -4.71%

Versus the S&P 500: -0.50%

Verdict: LOSER

Harley-Davidson Inc. (NYSE: HOG)

Goldman's Prediction: +22.9%

YTD Performance: -14.96%

Versus the S&P 500: -10.75%

Verdict: LOSER

Priceline Group Inc. (Nasdaq: PCLN)

Goldman's Prediction: +22.8%

YTD Performance: +9.51%

Versus the S&P 500: +13.72

Verdict: WINNER

Dow Chemical Co. (NYSE: DOW)

Goldman's Prediction: +22.8%

YTD Performance: -4.06%

Versus the S&P 500: +0.15%

Verdict: WINNER

Lennar Corp. (NYSE: LEN)

Goldman's Prediction: +22.7%

YTD Performance: +13.59%

Versus the S&P 500: +17.9%

Verdict: WINNER

ONEOK Inc. (NYSE: OKE)

Goldman's Prediction: +22.5%

YTD Performance: -27.68%

Versus the S&P 500: -23.47%

Verdict: LOSER

NRG Energy Inc. (NYSE: NRG)

Goldman's Prediction: +22.4%

YTD Performance: -26.09%

Versus the S&P 500: -21.88%

Verdict: LOSER

Williams Companies Inc. (NYSE: WMB)

Goldman's Prediction: +22.4%

YTD Performance: +7.25%

Versus the S&P 500: +11.46%

Verdict: WINNER

Caterpillar Inc. (NYSE: CAT)

Goldman's Prediction: +22.4%

YTD Performance: -16.49%

Versus the S&P 500: -12.28%

Verdict: LOSER

AbbVie Inc. (NYSE: ABBV)

Goldman's Prediction: +22.2%

YTD Performance: -4.63%

Versus the S&P 500: -0.42%

Verdict: LOSER

Tiffany & Co. (NYSE: TIF)

Goldman's Prediction: +21.7%

YTD Performance: -23.03%

Versus the S&P 500: -18.82%

Verdict: LOSER

EOG Resources Inc. (NYSE: EOG)

Goldman's Prediction: +21.6%

YTD Performance: -14.95%

Versus the S&P 500: -10.74%

Verdict: LOSER

AutoDesk Inc. (Nasdaq: ADSK)

Goldman's Prediction: +21.5%

YTD Performance: -22.16%

Versus the S&P 500: -17.95%

Verdict: LOSER

FedEx Corp. (NYSE: FDX)

Goldman's Prediction: +21.5%

YTD Performance: -13.27%

Versus the S&P 500: -9.06%

Verdict: LOSER

Cummins Inc. (NYSE: CMI)

Goldman's Prediction: +21.4%

YTD Performance: -15.55%

Versus the S&P 500: -11.34%

Verdict: LOSER

Garmin Ltd. (Nasdaq: GRMN)

Goldman's Prediction: +21.1%

YTD Performance: -28.81%

Versus the S&P 500: -24.6%

Verdict: LOSER

Final Tally: 12 Winners, 28 Losers

What's Next for Stocks? After a vicious six-day plunge, stocks have recovered some of their losses. But now investors want to know if this rally has legs, or if it was just a dead-cat bounce. The answer, it turns out, depends on a question that nobody's asking...

Follow me on Twitter @DavidGZeiler.

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