Investing in consumer-related companies during a recession could be a path to long-term gains -- if you pick the right companies at the right prices.

You just know that some stellar consumer brands have suffered unduly from Wall Street's unfair treatment.  To give yourself the best chance of finding these stocks, you'll need to answer two questions:

Disposable income: Yeah, some still have it
As of last week, S&P consumer discretionary stocks as a group were up 22% in the current quarter, and 11% for the year. Meanwhile, consumer staples gained 11% in the quarter, but lost 1% on the year. In light of continued job losses and mortgage troubles, which are now spreading to prime borrowers, it looks like shares of apparel, hotel, and leisure companies are ready for a dose of gravity.  But not all discretionary stocks are created equal.

I took a look at May same-store sales results for chain retailers to see which companies were faring well year over year. Then I winnowed down my shopping list to include only companies with strong balance sheets:

Company

Market Cap

P/E

May Comps

Total Debt

Quick Ratio

American Eagle Outfitters (NYSE: AEO)

$3 billion

19.5

(7%)

$75M

1.6

The Buckle (NYSE: BKE)

$1.5 billion

13.7

13.4%

$0

2.2

Aeropostale (NYSE: ARO)

$2.5 billion

15.0

19%

$0

1.6

Data from Yahoo! Finance and Motley Fool CAPS on June 8.

While this is far from a buy list, all three of the above stocks appear to deserve additional consideration.

Personally, I'm interested in Aeropostale. Although the stock is up around 60% in the past three months, it's nonetheless trading at an attractive PEG ratio of around 1.0. The PEG ratio is imperfect for many reasons -- for one thing, it relies on analysts' five-year earnings forecasts -- but there are still legitimate reasons to be upbeat about Aeropostale's future.

First off, the company sells its hip clothing and accessories to the trend-conscious 14-17-year-old crowd. Much of this demographic probably couldn’t tell you what a recession is, and teenagers have a way of wringing cash out of mom and dad, even when times are tight. In addition, the company's expansion into the Middle East looks promising, especially given the region's oil-driven long-term economic prospects.

Of course, there are risks. Teenagers who've historically relied on summer jobs to fund their back-to-school clothing purchases might pay Aeropostale fewer visits in the next few months. But with no debt and a strong brand, it looks to me like the company has staying power, even if business drops off for a season or more.

The enduring appeal of soap and cereal
Discretionary goods may be all the rage, but nothing beats the safety of consumer-staples companies. You'd be hard pressed to find dividends this healthy in other consumer-related industries. Below, I've listed some of my top picks, based on company fundamentals and valuation:

Company

Market Cap

2010

P/E

Dividend Yield

Volume Growth Most Recent Quarter

Volume Growth Est. FY09* Continued...