Goldman Sachs has added two new stocks to its high-conviction list following recent market volatility linked to escalating tensions between the United States and Iran. The investment bank selected ConocoPhillips, an oil producer, and Loar Holdings, an aerospace and defense supplier, as Goldman Sachs stock picks responding to geopolitical uncertainty and a broader shift toward capital-intensive industries. The additions were announced in a note released Tuesday as energy and defense sectors gained momentum.
The updated Goldman Sachs stock picks reflect what analysts describe as a rotation into “old economy” investments. These traditional sectors are benefiting from investor demand for what the bank calls “HALO” assets—heavy asset, low obsolescence businesses. According to Goldman analysts, the market is increasingly rewarding companies with substantial physical infrastructure beyond data center investments.
Energy Sector Gains Favor Amid Geopolitical Tensions
ConocoPhillips emerged as a strategic addition to the conviction list as oil prices climbed in response to Middle East conflict concerns. The Houston-based energy company has experienced share price appreciation as supply disruption fears intensified. Goldman’s head of Americas natural resources equity research, Neil Mehta, emphasized the company’s favorable positioning for the coming years.
According to Mehta, ConocoPhillips is approaching a significant transition period. The company is moving from a phase of substantial capital investment in reserve development to what Goldman characterizes as “investment harvesting.” This shift is expected to bring major projects online while reducing capital expenditures over the next three years.
The anticipated free cash flow inflection represents a key catalyst for the stock, Goldman noted. Enhanced cash generation relative to industry peers should support stronger shareholder returns and balance sheet strength. The bank projects approximately 10% upside potential from current price levels for ConocoPhillips shares.
Meanwhile, broader oil market fundamentals support the bullish thesis. Energy supply concerns stemming from geopolitical instability have created what Goldman views as a strong macro backdrop for petroleum producers. Rising crude prices are expected to deliver the most significant economic impact from the ongoing conflict.
Aerospace Supplier Offers Growth Through Acquisitions
Loar Holdings represents Goldman’s second addition to its stock picks, bringing defense sector exposure to the conviction list. Noah Poponak, the bank’s managing director covering aerospace and defense, described the company as among the highest-quality earnings compounders in the industry. The relatively young publicly-traded company supplies specialized components to aerospace manufacturers.
Additionally, Loar Holdings offers substantial merger and acquisition opportunities according to Goldman’s analysis. With revenues approximately twenty times smaller than competitor TransDigm Group, the company maintains significant balance sheet capacity for growth. The fragmented nature of the aerospace supply chain positions Loar as a preferred acquirer of complementary assets.
Goldman analysts highlighted the combination of strong organic growth potential and acquisition runway as key advantages. The company’s ability to supplement internal expansion with strategic purchases should drive consistent earnings compounding. This strategy aligns with the broader market preference for capital-intensive businesses with sustainable competitive positions.
Broader Market Rotation Benefits Traditional Industries
The additions to Goldman Sachs stock picks illustrate changing investor priorities beyond technology sectors. Market participants are reassessing valuations for companies with tangible assets and lower obsolescence risk. This rotation extends across multiple segments of the economy, according to Goldman’s research team.
However, the investment bank emphasized that the trend encompasses more than infrastructure providers. Capital-intensive businesses throughout various supply chains are receiving renewed attention and valuation support. The shift reflects evolving views on asset quality and competitive durability in an uncertain economic environment.
Goldman has not specified when it will next update its conviction list or whether additional energy and defense names may be considered. The bank’s ongoing assessment will likely depend on geopolitical developments and continued market rotation trends in coming weeks.
