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Goldman Sachs' Consumer Stock Best Buys for 2012

Goldman Sachs' latest "Conviction List" for the Americas, a roster of "buy"-rated U.S. stocks, highlights 11 consumer companies with upside of as much as 55 percent in the coming year.

Goldman's research team is more upbeat than its economists, who have a bleak outlook for 2012 in calling for a little-changed S&P 500 Index and economic growth of a mere 1.5 percent.

Woman window shopping on a snowy street
Stuart O'Sullivan | Stone | Getty Images
Woman window shopping on a snowy street

But its analysts said that certain sectors, including select consumer cyclical stocks, have "attractive risk/reward," and should handily beat the broader market.

That's because improving employment trends, moderating prices, and an inability of Americans to defer some purchases any longer have been bolstering consumer spending. For example, one gauge of U.S. consumer confidence last week rose to a six-month high and online holiday sales have already surged 15 percent from last year, to almost $25 billion.

This is the season when investment banks, strategists and fund managers make their picks for the following year. If there's been one thread, it's that consumer stocks are poised to rebound next.

S&P Capital IQ expects the economy to strengthen in what is one of the most bullish assessments.

The research firm says certain industries tend to lead in the period following an economic slump. Those are consumer discretionary stocks, which outperformed the broader market 100 percent of the time, with an average gain of 29.5 percent within six months of the market bottom; followed by information technology, 80 percent of the time, with an average increase of 30 percent; industrials, 80 percent of the time, with a 26 percent advance; and materials, 80 percent of the time, with a 24.8 percent gain.

There have been poor performers this year that have room to run in 2012. According to TheStreet analyst Lindsey Bell, brewer Molson Coors Brewing, carmaker Ford and toy company Hasbro would be consumer shares to gain the most from an upturn in the economy.

Even financial shares, which have been in the doghouse for most of this year, may be more prosperous in 2012. William Blair, a Chicago-based investment bank, has selected credit card firm Visa, insurance broker AON and check-cashing company DFC Global in favor of the big global banks to lead the financial sector next year.

As for Goldman Sachs, its global equity strategy unit has its own set of picks for the coming year that may differ from the "conviction buy" list, as they are based on different criteria.

In inverse order of potential upside appreciation, here are Goldman Sachs' 2012 consumer cyclical sector stock picks:

11. McDonald's

Company Profile: McDonald's generates revenue through company-owned restaurants, franchise royalties and licensing. It has 33,100 restaurants in 117 countries.

2011 Return: 28 percent

Market Cap: $100 billion

Potential Upside: 5 percent to $103

10. Beam

Company Profile: Beam is the fourth-largest premium spirits company in the world. Its most notable alcohol brands are Jim Beam, Maker's Mark and Canadian Club.

McDonald's is getting its biggest boost from abroad, as the company last week reported that its Asia/Pacific, Middle East and Africa division posted the strongest same-store sales growth in November of all its business units, with sales up 8.1 percent from the year before.

2011 Return: 13 percent

Market Cap: $8 billion

Potential Upside: 7.4 percent to $56

9. General Mills

Company Profile: General Mills makes breakfast cereals, refrigerated baking dough and other snack foods, including ice cream and yogurt. Its brands include Cheerios, Betty Crocker, Pillsbury and Yoplait. International sales account for about 20 percent of revenue.

2011 Return: 13.6 percent

Market Cap: $26 billion

Potential Upside: 9 percent to $44

8. Nike

Company Profile: Nike is the world leader in sports footwear and apparel.

2011 Return: 14 percent

Market Cap: $36 billion

Potential Upside: 10.6 percent to $108 (in six months)

7. TJX Cos.

Company Profile: TJX is the nation's largest off-price retailer of apparel and home fashions under the store names T.J. Maxx, Marshalls, Winners, HomeGoods and HomeSense stores.

2011 Return: 42 percent

Market Cap: $24 billion

Potential Upside: 10.7 percent to $70

6. Coca-Cola

Company Profile: Coca-Cola is the world's largest maker of nonalcoholic beverage concentrates and syrups. Its brands include Coca-Cola, Sprite, Dasani, Powerade and Minute Maid.

2011 Return: 2.7 percent

Market Cap: $152 billion

Potential Upside: 11 percent to $75

5. J.M. Smucker Co.

Company Profile: Smucker’s makes coffee, fruit spreads, peanut butter, shortening and oils, baking mixes and frostings and natural products under the brand names Smucker's, Folgers, Dunkin' Donuts coffee, Jif, Crisco, Pillsbury and Hungry Jack.

2011 Return: 18 percent

Market Cap: $9 billion

Potential Upside: 11 percent to $86

4. Williams-Sonoma

Company Profile: Williams-Sonoma is a leader in the home-furnishings industry, and its brands include the Williams-Sonoma stores, which offer high-end cooking utensils and other household products and Pottery Barn stores, which sell casual home accessories.

2011 Return: 10.6 percent

Market Cap: $4 billion

Potential Upside: 11.5 percent to $44

3. Whole Foods

Company Profile: Whole Foods Market is the largest U.S. retailer of natural and organic foods. It operates about 300 stores in the U.S., Canada and England.

2011 Return: 37 percent

Market Cap: $12 billion

Potential Upside: 15.7 percent to $80

2. Dick's Sporting Goods

Company Profile: Dick's Sporting Goods operates 455 stores in 42 states, mostly in the eastern U.S., as well as 81 Golf Galaxy stores in 30 states.

2011 Return: 3.6 percent

Market Cap: $3.7 billion

Potential Upside: 26 percent to $49

1. Comcast

Company Profile: Comcast is the largest cable TV operator, serving 52 million households. The firm also offers Internet access and phone service. It combined its cable networks with NBC Universal to create a new 51 percent-owned venture early this year.

2011 Return: 3.2 percent

Market Cap: $47 billion

Potential Upside: 55 percent to $35

Comcast is the majority owner of NBC Universal, the parent of CNBC and CNBC.com.

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TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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