Retail, A Less Often Discussed Oil Trade (SBUX) (NKE) (TJX)

The decline oil prices has investors searching far and wide for tradeable ideas. So far investors short E&Ps, oils services, and Russia's currency have been rewarded handsomely. On the long side, airlines and cruise ship stocks are obvious beneficiaries. Other notable calls with somewhat mixed results include shorts on alternative energy, Canadian banks, and Texas housing.

A less often discussed trade, and the topic of a research report today by Goldman Sachs, is long retail. In the view of an team of analysts including Matthew J. Fassler, case studies suggest precedent for sustained upside from energy.

"Assessing moments when oil prices declined sharply, we see retail stocks have typically outperformed. We believe the current period most closely resembles 1986 and 1997-1999. Both shared key characteristics with the current backdrop; retail stocks outperformed in both. But based on precedent, they have more room to run," said Fassler.

"In 1986, the downturn in oil prices, which reached 63% from peak to trough, was driven by supply; retail sales held up well, and the S&P Retail Index outperformed the S&P 500 by 16% over seven months," continued the analyst.

"In 1997-1999, oil declined 58% from peak to trough based on choppy global demand and despite a solid US backdrop. Rates stayed in check in global macro challenges. The S&P Retail Index outperformed by 70% over this nearly two-year period. Most of the outperformance reflected better earnings growth; fewer than half the 25 names we surveyed – public then and now – experienced relative multiple expansion," he added.

Goldman's top retail and restaurant picks include CL-Buy rated Carter's (NYSE: CRI), Nike (NYSE: NKE), PVH Corp. (NYSE: PVH), Starbucks Coffee (NASDAQ: SBUX), TJX Cos. (NYSE: TJX), and Williams-Sonoma (NYSE: WSM).

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