If you want to bet on millennials, go long sports and organic food, and short chocolate and cereal.
That's according to a new Goldman Sachs research report that lays out a strategy for trading the rise of millennials. Among the report's recommendations: buy stock in Dick's Sporting Goods and Nike (since millennials lead active lifestyles and need sports gear), and sell stock in the Dr. Pepper Snapple Group, Hershey's, and General Mills (since millennials are consuming way less soda, chocolate, and cereal than their predecessors).
Goldman also gave a neutral rating to three stocks — Under Armour, Lululemon, and Sprouts Farmers Markets — that may or may not outperform expectations when it comes to fulfilling millennial needs. Here, via BI, is the bank's rationale:
- Under Armour (Neutral): Under Armour's "grass roots marketing approach" has helped its cause. In the early stages "brand awareness and adoption was virally driven."
- Lululemon (Neutral): While Lululemon has capitalized on female millennials' focus on fitness, its "multi-year outlook is clouded at the moment by uncertainty about brand strategy following a challenging 2013," writes Mann. "But with good execution we see LULU well positioned for long-term growth."
- Sprouts Farmers Markets (Neutral): Millennials have shown a preference for fresh and organic foods and this has seen increased investment from grocery stores and brands. "Sprouts offers an ideal combination of wellness products at value prices, capitalizing on two key themes we currently see resonating with millennials: 1) preference for fresh produce and natural/organic foods and 2) greater sensitivity to price vs. prior generations."
It's kind of surprising that it took Goldman Sachs this long to figure out what millennials want, given the recent attention they've been giving to their own twentysomethings. But, hey, pointing out healthy activity and nutritional trends among young people is better than calling them Yummies.