21 companies that give stock pickers their best shot at crushing the market, according to Goldman Sachs

Thomson Reuters

When stocks trade too similarly, it’s tougher for stock pickers to profit from unique opportunities.

The average three-month stock correlation on the S&P 500, a gauge of how uniformly stocks on the index trade, jumped from 9% in January to 52% last week. That was the largest and fastest increase outside 1987, according to David Kostin, Goldman Sachs’ chief US equity strategist.

But there’s some good news for stock pickers: Kostin expects correlations to fall, as regulation on tech companies and other policy risks create more individualized opportunities.

“We expect correlations for these stocks would likely revert to historical averages and present potential buying opportunities given their underperformance since March,” Kostin said.

The list below highlights 21 buy-rated stocks that Kostin says are more likely to have heightened responses to individual news and offer the best opportunities for stock pickers to beat their benchmarks.

“Consumer Discretionary and Health Care currently offer the best stock-picking opportunities,” Kostin said.