The best investors always look away from the crowd. No doubt, it's not easy to do – but it can result in some big-time killings.
That's been the case with Goldman Sachs (NYSE: GS). According to a piece in the Times Online, the premier investment bank was the only major firm to effectively deal with the subprime mortgage mess.
Basically, the folks at Goldman realized that mortgages were being issued to those who simply couldn't pay the bills. Hmmmm....maybe that's a problem, huh?
Yes, it doesn't seem like rocket science. But keep in mind, by avoiding subprime mortgages, Goldman was also leaving some fees on the table (which certainly goes against the nature of a finance firm).
But, Goldman's philosophy is: be long-term greedy. Interestingly enough, the firm is now positioned nicely to pick-up choice assets that will need to be unloaded.
True, Goldman has been far from perfect. Just look at the terrible performance of its Global Alpha fund. Yet the fact remains that Goldman made enough good calls to keep ahead of the curve.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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