Goldman's playbook for 5% 10-year yield — These strong balance sheet stocks are winners

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'We expect investors will continue to focus on balance sheet strength and avoid companies that are most vulnerable to increased borrow costs,' the firm said.

Investors should focus on stocks with strong balance sheets as these companies tend to be more resilient against high interest rates, according to Goldman Sachs. "Amid higher rates, we expect investors will continue to focus on balance sheet strength and avoid companies that are most vulnerable to increased borrow costs," David Kostin, Goldman's chief U.S. equity strategist, said in a note to clients.

Stocks with strong balance sheets have outperformed those with weak ones by 4 percentage points since the start of September, Goldman said. Companies with solid balance sheets that are well positioned for the higher rate regime included a slew of Big Tech names such as Google's Alphabet, Meta , Netflix and Nvidia . There are also a number of consumer names including Colgate-Palmolive , Costco and Chipotle Mexican Grill .

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