These companies spending big to grow their businesses are primed to outperform: Goldman

Companies that are spending big internally to grow their businesses should start outperforming if the economy remains on strong footing, according to Goldman Sachs. The Wall Street bank is advising clients consider buying companies with a high level of capital expenditure and research and development expenses. Those companies have outperformed those returning cash to shareholders via buybacks and dividends this year by 2 percentage points, Goldman said. Capex encompasses a company’s big, long-term expenses, including equipment, machinery and buildings, while R & D is associated with the expenses on the process of creating new products or services. “From an investor’s perspective, firms spending the most on capex and R & D have outperformed those spending the most on buybacks and dividends amid a strong economic growth backdrop,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note. Goldman pointed to global manufacturing data that bottomed last year and is in the process of rebounding. “Both managements and investors have become increasingly confident that growth will remain strong,” the firm said. In this environment, investors typically reward companies investing for growth when economic growth is accelerating, if history is any guide, Goldman said. The firm found a slew of stocks in the S & P 500 with the highest percentage of capex and R & D per market cap. The list includes numerous travel names such as Norwegian Cruise Line , United Airlines , American Airlines and Delta Air Lines . Several tech companies are also heavily investing in growth, including Meta Platforms , Intel , HP and Western Digital.