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Consumer Stock Picking -- Two Strategies For 'Late Cycle Consumer'

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Don't worry, there are some good picks out there even as consumer spending wanes in what many on Wall Street say is the latter part of the current economic expansion. 

A team of consumer stock analysts at Goldman Sachs wrote in a note "Late-cycle consumer roadmap -- opt for defensive growth." 

Here are your 2019 and 2020 strategy for consumer stocks. 

Low Priced Retail and Staples

Of the many themes in Goldman's extensive note, two stood out as guiding principles, starting with the ida of picking companies that perform at above average rates when spending slows. These are either lower priced players in their businesses or total consumer staples companies that don't see a huge magnitude of sales and earnings fluctuation as the economy moves about its cycles. 

"We favor names offering defensive fundamentals tether to lower income cohorts where the spending outlook is most robust," the analysts said. The top picks include Walmart (WMT) - Get Walmart Inc. Report , O'reilly Automotive (ORLY) - Get O'Reilly Automotive Inc. Report and BJ Wholesale (BJ) - Get BJ's Wholesale Club Holdings Inc. Report . It's important to note BJ's is up against thick competition in a fast changing and e-commerce driven grocery market. Target (TGT) - Get Target Corporation Report is Goldman's top pick in this category. 

Pick companies that are seeing long-term trends not much tethered to the broader economy, Goldman Sachs said. "As we contemplate a tough near-term backdrop for apparel and accessories, we prefer brands with idiosyncratic growth opportunities," Goldman said. 

The analysts recommend Canada Goose (GOOS) - Get Canada Goose Holdings Inc. Subordinate Report and Under Armour (UAA) - Get Under Armour Inc. Class A Report , among others.

Canada Goose is building a direct-to-consumer (highly digital) business, which has higher operating margins than its brick-and-mortar business. As DTC becomes a larger portion of Goose's operating profit, the earnings multiple should expand, although that may have already been priced in. Goose trades at 68 times forward one-year earnings currently. 

Goose is also in the early stages of building its China business. 

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