Goldman Sachs published a list of European stocks with upside potential exceeding 100%. One stock allegedly has 168% upside. They called it their "European Conviction" list because "Wild Guesses We're Contractually Obligated to Make Quarterly" tested poorly with compliance.
The firm did not specify which two companies earned this distinction. Smart move. Naming them would create a paper trail when the stocks drop 40% by October and some pension fund manager has to explain why he bought shares based on a projection pulled from the same statistical methodology used to predict lottery numbers.
168% upside means Goldman believes a stock will nearly triple. They arrived at this figure through rigorous analysis of price-to-earnings ratios, discounted cash flow models, and whatever number made the associate stop crying during his fourth consecutive all-nighter. The math checks out if you ignore every external variable including but not limited to economic conditions, competitor behavior, currency fluctuations, and the basic principle that stocks do not care what Goldman Sachs thinks.
Retail traders will read "conviction list" and assume Goldman's own money is behind these picks. It is not. Goldman's money is in index funds and real estate. Your money is in whatever stock they need to exit at a favorable price.
The other stock got "more than 100%" upside, which could mean 101% or 167%. Goldman rounded down to preserve mystery. Precision would undermine the magic. If they said 114% upside and the stock gained 112%, some compliance officer would have to file paperwork. Better to stay vague and let the disclaimer do the heavy lifting.
Two years from now one of these stocks will be up 170% and Goldman will take credit. The other will be delisted and no one will remember it made the conviction list. That is not cynicism. That is how conviction works when you publish enough lists.
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