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

NEW HIGHS OF NOTE LAST WEEK

Halliburton (HAL)… oil services
Patterson-UTI (PTEN)… oil services
Carbo Ceramics (CRR)… oil services
Atwood Oceanics (ATW)… oil services
Key Energy Services (KEG)… oil services
National Oilwell Varco (NOV)… oil services
Spectra Energy (SE)… gas pipelines
U.S. Steel (X)… you guessed it
Schnitzer Steel (SCHN)… scrap steel
Fluor (FLR)… infrastructure
Quanta Services (PWR)… infrastructure
Crude oil, Natural gas, Gasoline, Corn, Soybeans, Cocoa

NEW LOWS OF NOTE LAST WEEK

JetBlue (JBLU)… airline
US Airways (LCC)… airline
Continental Airline (CAL)… airline
MGM Mirage (MGM)… casinos
Boyd Gaming (BYD)… casinos
Wynn Resorts (WYNN)… casinos
Las Vegas Sands (LVS)… casinos
Monarch Casinos (MCRI)… casinos
Winnebago (WGO)… RVs
Thor Industries (THO)… RVs
Fleetwood Enterprises (FLE)… RVs
Goodyear Tire (GT)… tires
News Corp (NWS)… media
Hershey (HSY)… candy
Playboy (PLA)… eye candy
American Express (AXP)… credit cards
Capital One Financial (COF)… credit cards
International Gaming (IGT)… gambling machines
Circuit City (CC)… landfill stuffing continues to suffer
Veolia Environnement (VE)… world’s largest water stock
Honeywell (HON)… conglomerate
General Electric (GE)… conglomerate
United Technologies (UTX)… conglomerate
XM Satellite Radio (XMSR)… satellite radio
Legg Mason (LM)… asset management
Callaway Golf (ELY)… golf equipment
Whole Foods (WFMI)… expensive groceries
General Motors (GM)… read the letter from the Chairman
Lead, Nickel

Source: Brian Hunt’s Market Notes Monday, June 30, 2008

• Deere & Co. (DE), the world’s biggest maker of farm machinery, said yesterday (Wednesday) that its second-quarter profit rose 22%, mostly due to a jump in overseas sales. However, the company warned that rising costs of raw materials could cut into its earnings in the months ahead, the Associated Press reported. Profit for the period ended April 30 reached $763.5 million, or $1.74 per share, up from $623.6 million, or $1.36 per share, last year.

• E.I. du Pont de Nemours & Co. (DD) – commonly known as DuPont – said yesterday (Wednesday) that it would form a new joint venture with Genencor, a division of Danisco A/S, to develop and commercialize cellulosic ethanol, or fuel derived from nonfood sources. The venture, to be called DuPont Danisco Cellulosic Ethanol LLC, will focus initially on making fuel from the leaves and stalks of corn and from sugar cane bagasse, the Associated Press reported.

• SABMiller Brewing PLC (SBMRY) said yesterday (Wednesday) that it would buy the rights from rival Anheuser-Busch Cos. Inc. (BUD) to distribute Grolsch beer in the United States, the Associated Press reported. Anheuser-Busch acquired distribution rights to the Dutch beer in February 2006, but SABMiller took over Royal Grolsch NV this past February for $1.2 billion.

• As China recovers from the devastating 7.9 magnitude earthquake, some economists say the government is less inclined to raise interest rates in the near future, despite widespread inflation. “In the coming months there will be no rate hikes,” Ting Lu, an economist at Merrill Lynch & Co. (MER) in Hong Kong, told Bloomberg. “During a natural disaster policy makers will be very careful not to use aggressive policy tools.”

• Shares of BHP Billiton Ltd. (BHP) rose yesterday (Wednesday) amid speculation that Aluminum Corp. of China Ltd. (ACH) is interested in acquiring a stake in the world’s biggest mining company, Bloomberg reported. If it happens, it could add an interesting twist to BHP’s $178 billion hostile offer for rival Rio Tinto plc (RTP), as Aluminum Corp. of China recently purchased a stake in Rio in February.

• Whole Foods Markets Inc. (WFMI) shares dropped 14% yesterday (Wednesday) when the high-end food retailer reported that same-store sales open for a year or more only increased 6.7%. The once-popular food chain has been hard hit as consumers seek out bargains to make the weak dollar stretch farther. Whole Foods shares shed $4.68 to close at $28.96.

• Higher food and packaging costs took a big bite out of Jack in the Box Inc.’s (JBX) bottom-line. Same-store sales dropped 0.1% for the San Diego-based fast food chain in its fiscal second quarter. Shares dropped over 10%, with a decline of $2.90, to close at $24.87 yesterday (Wednesday).

• Shares of U.S. mortgage giant Freddie Mac (FRE) gained more than 9% yesterday (Wednesday) after the firm announced a smaller loss due to accounting changes that reduced charges by $2.6 billion. Freddie Mac shares gained $2.29 to close at $27.25.

Source: Global Investing Roundups: Thursday, May 15th, 2008

The green grocer’s stock price plunged close to 14% today the company reported shrinking first quarter profits that missed Wall Street’s estimates. “So much for the theory that Whole Foods’ customers were such chic-chic bourgeois butterballs that they would always spend top dollar for an organic quiche. And that the company would be immune to a downturn,” snarked Al Lewis of Denverpost.com.

The stock traded at $31.63 that day. And of course, climbed up to $35 by May 2. Today, the stock dropped as low as $28.85… almost -9% below my initial recommended short price and -17.5% below the post-recommendation high. If even a millionaire lawyer like Obama is concerned about the price Whole Foods charges for arugula, I don’t quite see people flocking to stock up on it in the current quarter, either. Take short profits over the next two days… and shoot for double-digit profits!

I’ll let you know when before Friday! But remember… you heard it here first!

Yours cordially,
J. Christoph Amberger
Executive Publisher
TodaysFinancialNews.com

P.S.: And please make sure you check out TFN’s roving editor Andrew Snyder’s new artice “ETF Investing: Protect yourself from the downside”.

Source: Whole Foods (WFMI:Nasdaq) plummets: It’s about time!