By Peter Switzer, founder of the Switzer Super Report

15th December 2011

This week I want to share with you the observations of my favourite US analyst ? Abby Joseph Cohen ? who is the senior investment analyst at the legendary money making operation called Goldman Sachs.

Cohen is an ex-Federal Reserve economist and joined Goldman in 1990 and has not only been responsible for some big calls, but is regarded as a legend on Wall Street.

Talking on CNBC she said the Brussels summit was one small step along the way to putting Europe on an even keel and while she pointed to the likelihood Europe is already in recession and volatility hurting investor confidence now, she saw opportunities.

Meanwhile, US economic activity is performing better than expected in some key areas, but investors still have a risk aversion attitude that will hold back stock prices. Part of the current selling is fund managers taking profits as they square up their books for end-of-year reporting, but Cohen insists there is great value in stocks.

"By almost any metric there is very good value in the US equity market," she said. "On a P/E (price to earnings) ratio basis, we are at 12-times earnings when we would normally be at 16 to 18-times with this sort of low 2012." Investors have no tolerance for company performance or economic data disappointment and run to cash.

Cohen says Thanksgiving usually brings more optimism about the future, but Europe's woes have been such a challenge because the unknown factor is bigger than what most investors are used to. Like the rest of us, she wants to see some policy advancement in both Europe and the US, but says Goldman's investment strategy team is still focusing on good growth companies, which are currently great value.

She thinks US financials are a classic case of undervalued companies with growth potential, but she wasn't arguing all companies were great buys.

This year my advice to investors has been to buy on the dips and concentrate on great dividend paying companies. This meant that companies such as Telstra and the Commonwealth Bank have been great buys this year, but of course there were many others.

I think this strategy still works because when Europe eventually comes up with something that is more credible and possibly involves some additional liquidity, the stock market will take off and all boats will go up on a rising tide.

That said, in this newsletter and on my Sky Business TV program next year, I will be searching for the potential high-growth companies that are badly undervalued in this negative, highly volatile investing environment. Watch this space!