Take Fred’s, Inc. (NASDAQ:FRED), for instance, a deep-discount retailer with 600 stores in 15 southeastern states. Investors have punished the stock, sending it to levels that value it less than half of its competitors.

It’s differentiator is serving low-income customers in rural and inner-city neighborhoods, far from Target and Walmart stores. Many customers prefer the ease of access to Fred’s stores, as opposed to having to drive to the nearest big box retailer.

With annual sales of $1.8 billion, its merchandise and business model is similar to that of its two biggest competitors: Dollar Tree (NASDAQ:DLTR) and Family Dollar Stores, Inc.(NYSE:FDO).

But that’s where the similarities end. In the past year, Fred’s shares have fallen nearly 15% while its competitors have each risen over 20%. The reason? The company was just plodding along, languishing under an anemic, lethargic management.

Back in February, Fred’s Board of Directors decided to make a change, and it brought in a new CEO, who’s been generating quite a lot of buzz since his arrival.

Bruce Efrid – an industry veteran – hasn’t wasted any time: he’s closed stores that were underperforming, gave the remaining ones a new look and feel, and remade company inventory procedures.

Efrid was just what the doctor ordered: Fred’s has strongly outperformed its peers since his appointment. Even so, the stock still looks like a relative bargain. Shares trade at 1.4 times book value, while Dollar Tree and Family Dollar Stores are both twice that, suggesting Fred’s shares are undervalued by 50% compared to its peers.

Fred’s has very little debt and a nice cash pile of $46 million. Efrid’s confident his changes can increase top line sales by 10%. He also is gunning for a corresponding increase in margins from their current 1.8% to 3%.

If he’s successful, Fred’s shares could easily pop by 50-75% in the coming months, handing investors who take a position now a nice Christmas present.

Source: Fred’s, Inc. (Nasdaq: FRED): Stock of the Day

When consumer debt is high, the only way to increase consumer spending is by (a) increasing the consumers’ take home pay or (b) forgiving a portion of consumer debt (which isn’t even guaranteed to prevent a default on that debt).

This year alone, over 2.9 million Americans have lost their jobs. So expecting a better paying job is out of the question. The government is already searching for ways to increase taxes, so we doubt consumers will get any significant tax cuts. And considering Team Obama is so keen to protect the banks, chances are they aren’t going to be pardoning consumer debt.

Let’s be frank. Consumers aren’t making more money this recession. And what money they do have will be spent to pay off their debt. That means discount retailers – the ones that sell everyday items for cheap – will lead the retail sector for some time to come. One of the best is Dollar Tree, Inc. (NASDAQ: DLTR).

Last week, I pointed out Dollar Tree (DLTR) as one of those companies doing well. Another is one you probably know quite well, McDonalds (NYSE:MCD).

McDonalds has done extremely well over the past few years (no thanks to their stupid “I’m lovin it” series of commercials). It appears that their dollar and breakfast menus have been outperforming everyone’s expectations.

(On a side not, I love McDonald’s coffee. A little watered down, yes, but delicious none the less.)

From the middle of 2006 to today, MCD climbed over 100%. And you would’ve made a healthy 10% + over the past twelve months alone (not including the 3.4% dividend).

MCD also consistently used its 50-week moving average pretty as a form of support.

Sure, MCD showed a decline in revenues for the fourth quarter of last year. But at the same time, MCD increased same-store sales by 7.2% in the December quarter – extremely impressive (Wal-Mart (WMT) is lucky to increase same-store sales by 3%).

All of this translates into continued strength for McDonalds over the next 12 months.

Most analysts feel the economy is heading south. As credit tightens and people lose their jobs, they’ll look to maximize every dollar they have. That means that businesses catering to “lower cost” consumers should do very well.

One business – which most people hate and even laugh at – is a company known as The Dollar Tree (NASDAQ:DLTR).

But take a look at how DLTR did throughout 2008…

As you can see, while every other brick and mortar retailer has been slammed (and even gone bankrupt) this year, DLTR managed to climb nearly 100%.

Making things even nicer, as consumer spending plummets, DLTR continues to move higher still.

You see, had you simply relied on technical analysis, you may have been tempted to not buy DLTR early last year. But if you have a solid idea as to which economic trends will prevail, then you can use that knowledge to pick the stock… and technical analysis to fine tune your entry and exit points.

This from Smart Profits Report:

‘Tis the season to… well, spend. And in a credit-oriented nation, Americans again proved that they do that better than the rest. The National Retail Federation (NRF) says 172 million consumers hit the malls or logged on to buy goods over the extended Thanksgiving weekend – a 17% jump from the same period in 2007. And ShopperTrak says “Black Friday” sales rose 3% to $10.6 billion over “B.F. 2007,” with the average consumer spending $372 – up 7.2% from a year ago.

Granted, a 3% sales rise isn’t spectacular, but it’s not terrible for a nation with a pathetic savings rate, a 3.7% year-over-year inflation rate in October, and 1.2 million job losses. I’m sure America’s battered banks are wondering exactly where these guys are getting their money from – and whether they can pay it back.

Retailers are doing their best to help – and potentially at their own expense…

The Retail Sector’s Vicious Cycle

Many still predict a rough time for retailers, with the NRF predicting a measly 2.2% rise in holiday shopping sales – the lowest since 2002. Retailers are compelled to offer eye-popping deals to cash-strapped consumers, but they can’t sustain the bargains forever, for risk of eroding their profit margins too much.

That could result in flat sales and profit growth, with some analysts suggesting that it could also lead to more bankruptcies, following electronics giant Circuit City, Linens n’ Things, and The Sharper Image. In turn, that could drive unemployment even higher.

Already, a major online trend is providing some clues…

When High Traffic Meets Falling Sales

The good news: Online traffic on “Cyber Monday” (the Monday following Thanksgiving, which traditionally kicks off the online shopping season) climbed by 10% over the same day in 2007, according to Pricegrabber.com. Other firms have also reported heavy activity, with Target (NYSE: TGT) expecting its web traffic to jump 40% this season.

The bad news: Online research firm comScore says web sales are down 4% so far this season and will remain the same as last year throughout the November-December compared at $29.2 billion. That’s prime evidence that deep discounts could squash profit margins. But essentially, retailers have little choice.

But what choices do investors have?

“It’s Wal-Mart Time”

A few weeks ago, my colleague Marc Lichtenfeld gave you three companies that could be set to buck the gloomy retail trend this season.

One of them was sector bellwether Wal-Mart (NYSE: WMT), whose CEO Lee Scott proudly proclaims, “It’s Wal-Mart time. This is the kind of environment that Sam Walton built this company for.”

He’s right. As consumers go all-out to dig up value, Wal-Mart is among those discount-oriented firms set up to not only weather this season’s storm, but to profit from it. Check out Marc’s article for more details, plus his thoughts on Kohl’s (NYSE:KSS) and Dollar Tree (Nasdaq: DLTR).

I’m going to throw another one into the mix – The TJX Companies (NYSE: TJX) – a company I actually highlighted here a year ago…

The Outlook For TJX

At the time, the stock traded around $28.50 and bounced to $32 by early February 2008, followed by a 52-week high of $37.52 in August.

Since then, however, shares have sunk back to the $20 area, as a combination of high oil prices at the time stifled consumer spending, while the U.S. dollar (the company also operates overseas, including Britain and Ireland), economy and stock market slumped.

Despite this, though, the firm reported a 4% and 3% sales rise in August and September respectively, compared with August-September 2007. That’s a testament to its business model – the company offers fashionable, quality goods (some of which it buys from other higher-end retailers’ excess inventory) at attractive prices.

However, total third quarter profit came in at $235.8 million ($0.54 per share), compared with $249.5 million ($0.54 per share) in Q3 2007 – a 5.5% drop, due to the negative economic climate and an exchange rate hit. Over the first nine months of 2008, though, TJX earned $629.9 million ($1.42 per share) over the $470.6 million ($1.00 per share) from January-September 2007.

TJX pegs fourth quarter EPS between $0.58 and $0.62 – lower than the $0.67 in Q4 2007 and the $0.72 estimates, but $2.07 to $2.11 per share in fiscal 2009, compared with $1.68 for this year.

Also, the company’s T.J. Maxx and Marshall’s stores could be prominent destinations for bargain-hunting shoppers this season. The fact that The Gap (NYSE:GPS) posted better than expected third quarter results could bode well for TJX. Other positive factors include the U.S. dollar strengthening a little and Card Activation Technologies settling its litigation against TJX.

Ultimately, fourth-quarter retail earnings will tell the full story of this holiday period

And while the overall gloom shrouding the retail sector could drag successful, bargain-oriented companies down with the pack in the short-term, provided their business models lure in discount-hungry consumers this season, they could end up having the final word.

Source: Tune Out The Retail Doomsayers… These Firms Could Bust This Season’s Trend

This from Smart Profits Report:

Stating that the retail sector has suffered a bombardment of bad news the last few months is like saying the Atlantic Ocean is wet.

My colleague Paul Moore wrote an excellent piece on Tuesday, detailing Circuit City’s (NYSE:CC) problems. Let me first say that I agree with Paul on Circuit City and that its woes are company-specific and a result of poor management, rather than a sector wide problem.

While we may not see bankruptcies springing up everywhere, expect this holiday season to be a bloodbath for retailers.

Let’s look at what this year’s crucial shopping season has in store – and of course, the best ways to profit…

A Shift In American Shopping Philosophy

“Shop ‘Till You Drop.”

No sooner have many Americans digested their Thanksgiving turkey and got over the tryptophan-induced grogginess and bloating than they rush out to the mall, with this rallying cry ringing in their ears.

The most important factor in trying to forecast retail sales is income. And because we’re not a nation of savers, if Americans are making money, they’re usually spending it soon afterwards.

The problem right now, though, is this: Because the country has endured a widespread slump, Americans are starting to change the way they think. They’re fearful about their incomes.

Average consumers have already cut back on their spending, and will likely tighten their wallets even more as we head deeper into this overarching bear market. And with good reason, too…

The Stats Paint An Ugly Picture

• On Wednesday, Fidelity Investments started the process of laying off 1,300 workers.
• Chicago Mayor Richard Daley said Wednesday that CEOs who do business in Chicago have warned him that mass layoffs are coming this month and in December – with more on the way next year.
• According to the Bureau of Labor Statistics, over 235,000 people lost their jobs in 2,269 mass layoff events, which are described as layoffs involving at least 50 people in a single action.  This was the highest total since 2001.
• Job losses on Wall Street alone are expected to total at least 45,000.

On top of that, initial jobless claims are at the highest level in eight years and we’ve got an unemployment rate of 6.5% – a figure not seen since 1994.

Those figures alone spell trouble for the retail sector, but when people suggest those numbers could climb into the double-digits, well… you can imagine the misery that would ensue.

Simply put, people are just plain scared. Retail is enduring a double-whammy. On one hand, it’s suffering because people are already getting laid off and don’t have the income to buy flat-screen TV and iPods. And following swiftly behind it is the very significant issue that existing workers, mindful of the ugly trend, are worried that the next swing of the axe will hit them.

In other words, it’s bad right now and likely to get worse. One of the biggest casualties of the whole affair will doubtlessly be the retail sector, as it gets pounded like a veal scaloppini.

Your Christmas Stock Shopping List Should Include These Three Retailers

Since the market hit the skids, I’ve been a big advocate of compiling stock watchlists to keep on your radar. That way, when it’s time to pull the trigger, you’ll have all the resources and information right there at your fingertips. All you’ll need to do is take a deep breath and fire.

So, with that happier thought in mind, here are some retailers you might want to start thinking about:

~ Kohl’s (NYSE: KSS)

Kohl’s is in an excellent position to take advantage of the bankruptcies of competitors such as Mervyns. According to Toronto-based Thomas Weisel Partners, Kohl’s has picked up 20% of Mervyn’s market share in areas where Mervyns had to exit.

Since Mervyns plans on closing another 149 stores in California, that gives Kohl’s even more room to maneuver, which should provide a holiday boost.

~ Wal-Mart (NYSE: WMT)

There’s no doubt that Wal-Mart’s core demographic is feeling the pinch in this economy, with little leeway to buy new televisions and other extravagances.

However, while they can easily cast aside those extras, they still need necessities such as food and clothing – areas where Wal-Mart excels because of its lower prices.

And speaking of lower prices, you’re likely to see Wal-Mart attracting new customers these days, too. Gone are the good old days when you could just stroll into Coach and treat yourself to a new purse or briefcase. Luxuries like that are off the table for now, so Wal-Mart options are looking better and better to many people.

As CEO Lee Scott states: “Wal-Mart has momentum as we move into the fourth quarter. At a time when our customer is feeling the pressure of a tough economy, Wal-Mart’s price leadership is more important than ever.”

One caveat, though. Despite blowing third-quarter estimates away, with profits rising 10%, Wal-Mart has trimmed its fourth-quarter profit outlook, due to economic concerns.

~ Dollar Tree (Nasdaq:DLTR)

Not surprisingly, Dollar Tree shares are up significantly this year. In fact, the company boasts the best margins in the business right now. It chalked up double-digit earnings growth over the past two quarters and consumer traffic is increasing. The stock is trading at just 1.09 times its expected 14% growth rate. We don’t advocate shoplifting, but this is a steal.

… And A Happy New Year

The retail picture isn’t pretty. But it’s not completely ruined.

There will be a time when it will be right to get back in to stocks like Whole Foods (Nasdaq:WFMI) and Tiffany’s (NYSE:TIF). And that time will be before the economy is showing signs of recovery.

Why? Because we want to buy them cheaply when nobody else wants them. But we still have time before that occurs. In the meantime, concentrate your efforts on the companies like the ones I mentioned above – ones that should thrive and emerge stronger because of the hardship.

Source: Grandma Got Run Over By A Reindeer: How You Can Profit From The Retail Sector Bloodbath This Holiday Season

Stores like Whole Foods (NASDAQ:WFMI) and Trader Joes are watching their customers head to low-cost competitors like Wal-Mart (NYSE:WMT) and Safeway (NYSE:SWY).

It is no surprise to see an ultra-cheap retailer like 99 Cents Only Stores (NYSE:NDN) climb its way to the sole spot on the list of companies reaching 52-week highs today. The global economic crisis has actually been the best thing to happen to the company’s share price in a long time.

The rationale behind the positive run is obvious. When the economy is in the gutter, consumers have less money to spend on the things they need. So they go to the cheapest retailer they can find.

A wino’s delight

When we need a toothbrush, why spend $4.99 on a fancy name-brand brush when you can get one for less than a buck?

Or how about cleaning supplies? Or stationary? 99 Cents Only even sells bottles of wine at its namesake prices.

Of course, 99 Cents Only is not the only ultra-cheap retailer doing well these days. Dollar Tree (NASDAQ:DLTR) and Family Dollar (NYSE:FDO) are both multi-billion dollar companies making their investors money over the past few months.

While these companies may appear as an oasis in a desert of losses, investors need to use caution. All three stocks have gotten a lot of attention lately and are becoming overpriced.

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For example, after more than doubling its share price since July, 99 Cents Only has a price-to-forecasted-earnings ratio of over 30. If the next earnings report misses expectations by only a small margin, shareholders could be in for a sizeable drop.

Granted, sales have increased over the past three months and are likely to surge even higher during this quarter, but the competition is catching up. Traditional retailers, which are often slow to react to economic waves, are finally making moves to target consumers during a recession.

Eye-catching sales and incentives are drawing cash-conscious consumers back into retail stores. Beyond that, ultra-discounters do not offer all the products consumers require. They will still head to the more-expensive “big box” stores for their needs.

Consumers are changing their habits, leading savvy investors to follow. Track the trends and invest appropriately and you could be one of the traders celebrating a 52-week high today.

Source: Cheap date: 99 Cents Only Store (NYSE:NDN) hits 52-week high

These violent swings can be devastating for the short-term investor. But Jon Herring says market volatility is handing long-term investors a once-in-a-generation chance to buy world-dominating companies at bargain prices.

Jon recommends seven stocks that are price leaders or have pricing power.

This from Investor’s Daily Edge:

My belief is that in the near term, we are due for a relief rally. But in the larger scope, we are in the beginning stages of a long, slow recession… at best. At worst, we are facing a depression of generational magnitude.

So how do you prepare? How do you prosper in the years ahead?

First of all, if you are a long-term investor you should embrace the opportunities that are before you. Right now, and in the months to come, you will have countless opportunities to buy world-dominating companies at once-in-a-lifetime prices. I’m talking about companies that will be here (and that will be a lot larger) 20 years from now, no matter what happens in the markets or the economy.

I’ll get to that in a moment. In the meantime, let me stress something I covered in my previous article for IDE Unplugged. If you do not own any physical gold and silver, buy some immediately (if you can find it). The recent failures in the financial market, particularly AIG (NYSE:AIG), have begun a global run on the banks that is gathering speed.

Not to mention that with the current bailout, the powers that be have clearly indicated that they will inflate the currency to nothingness. The table is set for runaway inflation and ongoing weakness in the dollar.

And don’t mistake gold and silver stocks for gold and silver. They are not the same. And as we have seen recently, they do not always trade in lock-step. Monday was one of the biggest down days in history for mining stocks… while gold and silver were up strongly.

There is currently massive demand for physical gold and silver products. Many dealers are completely sold out of bullion products. And the rush for lifeboats hasn’t even begun.

We are already seeing shortages in the physical metals, with just a small amount of investor interest. What do I mean by a “small amount of investor interest”? Do a survey. Ask 20 people you know, friends, family, colleagues, etc. if they own ANY gold or silver investments (not counting jewelry). That would include stocks, coins, etc. It is likely that not a single person you ask has any position at all. Maybe a few.

Don’t wait until you hear about hard assets on the nightly news. By then it will be too late. Ensure your wealth with tangible assets, today! More on this in future articles.

Now, here are some suggestions for the money you hold in the stock market. This is no time to ignore proper asset allocation, holding most of your money in the U.S. market or mostly in stocks. Alex Green has written an excellent book, called the Gone Fishin’ Portfolio, which outlines an asset allocation plan that is low cost and low hassle and has proven to out-perform the S&P as well as the vast majority of money managers over the long-term.

Diversify your funds broadly across small cap stocks, large cap stocks, U.S. equities, international equities, emerging markets, real estate investment trusts, precious metals, inflation protected bonds, treasury bonds, high-yield corporate bonds and investment grade corporate bonds. Do this, and you can mostly forget about your long-term money (except for an hour each year when it comes time to re-balance) without worrying about your account blowing up.

Finally, if you’re looking to invest in individual stocks, the coming months will be a great time to pick up world-leading companies at once-in-a-generation prices.

Focus on companies with a sizable barrier to entry. Some investors liken this to a castle with a moat. For example, what would it take for another company to come along and compete with UPS? What would it take to set up a global distribution network, with all the logistics, thousands of trucks and planes, hubs networks, etc.?

While UPS might suffer a bit in the near term due to the economy, high fuel prices, etc… the chances are excellent that it will be a larger company five or ten years from now than it is today.

Also, in times like these (recession and the potential for high inflation) you want to focus on companies that are price leaders and companies with pricing power.

Price Leaders are the companies that compete best on price.

When consumers are skimping and saving and looking for a deal, where do they go? McDonalds (NYSE:MCD)… Wal-Mart (NYSE:WMT)… Dollar Tree (NYSE:DLTR). Not surprisingly, all of these stocks are near their all-time highs, despite everything else that is going on in the markets.

Companies with pricing power are ones that can raise their costs to constantly stay ahead of inflation, without eroding their business.

Some companies cannot raise their prices without causing a downturn in business.

However, companies such as Johnson & Johnson (NYSE:JNJ), Kraft (NYSE:KFT), Coke (NYSE:KO) and Proctor & Gamble (NYSE:PG) can bump up their prices to stay ahead of inflation without causing a downturn in their business.

If you want a Coke or a box of macaroni and cheese, your going to buy it, whether it is 10% more expensive than it was last year or not.

Owning a share of these companies ensures that your money will continue to grow as these businesses expand, and it will do so at a rate greater than inflation.

Source: Your Bear Market Survival Plan

According to a recent survey, three-quarters of the American public think that we’re currently in a recession. The Dow is trading around the same price it was seven years ago and only seems to be heading lower.

Fuel and food prices are at all time highs and the employment picture is gradually getting worse.

And all of this on top of a housing crisis that has yet to fully take hold.

Depressed enough yet?

Basically, we’re standing on the tracks and the train is coming — I don’t need a PhD in economics to figure that much out — the only question is, do we stand here and let it hit us or do we get out of the way?

I’m voting for getting out of the way, who’s with me!?

But it’s not enough to just “get out of the way.” We’re investors; we should do whatever we can to profit from the current economic and market climate too.

On TickerHound, we’ve been seeing questions on this exact topic for the last couple of months, you can check out what some of the other members have had to say here:

What are the Top Three Investments for a Down Market?

I decided not to weigh in at the time; it was too tough to tell where things were headed. But I think the picture has become much clearer now and today I wanted to share where my trades will be focused for the second half of this year.

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Discount Retailers

Given the fact that the American consumer thinks we’re in a recession, it stands to reason that consumer spending will continue to slow this year. That means luxury goods or purchases that require large lump sum payments are going to get pushed to the back burner for the time being.

So what will consumers be buying?

The usual, of course: Groceries, medicine and maybe even some clothing.

Consumers will certainly continue to buy these items, but they’ll be very picky as to where they buy them. Meaning, I doubt you’ll see long lines at Gap Stores anytime soon, or baby boomers opting to buy brand name drugs as opposed to the generics. People will be extremely cost conscious as we head into the second half of the year.

That’s why it’s important we focus on retailers that cater to the cost conscious consumer.

For me, that means looking at stocks like Wal-Mart (WMT: NYSE) and Dollar Tree (DLTR: NASDAQ), both of which have done very well over the last six months.

So I’ll be looking to go long Discount Retailers.

Alternative Energy

Forget the green movement and all the damage we’re doing to our environment with current forms of energy production, let’s just look at what’s going on at the pumps every day. The price of fuel is rising and it doesn’t look like it’s coming down anytime soon.

What’s a gallon of gas going to cost by the end of the summer: $5.00? $5.50?

The bottom line is, our dependence on crude is killing our economy and many of our industries; everything from transportation to shipping.

It doesn’t take a rocket scientist to know that we’ll need to look for alternative sources of energy in the not-too-distant future.

But it would take a rocket scientist to know which companies will pan out in this emerging sector. So while I won’t be buying any individual companies just yet, I will, however, be looking to go long on some of the ETFs that cover the alternative energy market.

I’ve had my eye on several for a while now — PBW, QLCN and GEX, just to name a few.

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Automakers

This one is a no-brainer for me for the following reasons:

• Decreasing consumer spending
• Increasing cost of fuel
• Increasing cost of steel

A new car will certainly be out of the question for many American consumers for quite some time. I think food, water and medicine will be higher up on the priority list for most folks in this country.

So as this market continues to head south, so too will the Auto stocks.

Luckily for us it won’t be too hard to pick which automakers to short; they’re all performing equally poorly these days. So I’ll probably go ahead and short the Big Three for the near term. I can’t see any of them turning the corner anytime soon.

One of the most important lessons I ever learned in my years in the market is that as investors we can make money regardless of how the economy is doing. As long as we don’t get emotional, lose our cool or make decisions that go against the facts, we can come out of this downturn just fine.

So make sure you play this bear market, don’t let it play you. For more on this, read what my readers have written…

Source: Weighing in on Today’s Bear

As I was doing my usual bout of “marathon weekend reading” I came across an interesting piece on Warren Buffett’s recent trip overseas. For those who don’t keep tabs on the “Oracle,” Buffett has been touring Europe for the last week or so in an effort to promote Berkshire Hathaway on the other side of the pond.

Reason being, Buffett’s looking to start buying up “family owned, privately held” businesses on the cheap overseas.

It’s difficult for him to find “Buffett-sized” deals in the U.S. anymore, so it only makes sense that he’d look for greener pastures elsewhere. However, Buffett also gave another reason for why he might want to start placing his bets in other parts of the world…

My friends and I have been debating the “recession” topic for a while now: Are we currently in one? Will we run into one this year or next? What will the effects be?

But when I read that Buffett thinks the U.S. is already in a recession and it will be “longer” and “deeper” than any we’ve seen for quite some time, I definitely began to think less about “what if we go into a recession” and more along the lines of “What should I do with my money now?”

There are dozens of questions (and even more answers) on TickerHound about which sectors hold up the best during a bear market, but a recent question is what inspired me to write today’s article:

“Will certain retailers do well during a recession?”

Traditionally, retailers don’t do well at all during a downturn — consumers start to curtail their discretionary spending as times get tougher, and items like clothes, cars and all the other little “extras” aren’t ranked very high on the “purchasing priority list.” However, if you really think about it, there are some retailers that “should” do rather well during a protracted downturn.

The fact of the matter is, people aren’t going to completely stop buying the little extras, they’ll just be more selective about where they buy them.

While I’ve come a long way since my childhood, I still remember what it was like when times were tough around my house. We were a blue collar household, three kids, my parents were always hustling at the end of each month to make ends meet — so when one of us needed new clothes, school supplies, etc, we’d take a trip to the closest discount store and bargain hunt.

Without doing a survey of every household in the U.S., I’d bet that when times are tough and a recession is imminent, most of America behaves the same way. In fact, if you take a look at a 10-year chart for some of the discount retailers, you’ll immediately see that their stocks do better when the market is doing worse!

So here are a few discount retailers that I think are worth digging into if you’re looking for some “Retailers for a Recession”:

1. Dollar Tree (DLTR: NASDAQ)

• Market Cap: $2.99 Billion
• P/E: 15.67
• Dividend: N/A
• 12 Month Price Gain (Loss)%: (19%)

2. Family Dollar Stores (FDO: NYSE)

• Market Cap: $2.76 Billion
• P/E: 13.5
• Dividend: 2.5%
• 12 Month Price Gain (Loss)%: (40%)

3. Fred’s (FRED: NASDAQ)

• Market Cap: $438.65 million
• P/E: 41.13
• Dividend: 0.7%
• 12 Month Price Gain (Loss)%: (25%)

4. 99 Cents Only Stores (NDN: NYSE)

• Market Cap: $538 million
• P/E: 85
• Dividend: N/A
• 12 Month Price Gain (Loss)%: (46%)
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