Today’s Winning Trade: The Impoverished Consumer Returns (WMT, MCD, DG, DLTR, FDO)

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On a day when lower oil has not prevented a triple-digit drop in the DJIA and a larger 1.7% drop in the S&P 500, we wanted to see what was working out there.  There are select single-story gainers out there but the most obvious standout winners are the retail stores that actually benefit from a renewed trend back toward economic uncertainty.  As the consumer did prove that shopping had to be done no matter what the economy did in the recession, investors are bidding up the trade-down economy plays.

With a “Day of Rage” protests coming and with Libya, Egypt, and now Saudi Arabia dominating the headlines again, with a rise in weekly jobless claims, and with a Chinese trade deficit, the only thing that makes this move surprising is that many professionals still want to wear their bull-market hats.  Wal-Mart Stores Inc. and McDonald’s Corp. (NYSE: MCD) are the only two Dow Jones Industrial Average components which are up on the day when most DJIA components are down more than 1%.

Wal-Mart Stores Inc. (NYSE: WMT) was the only stock up on the day as the company said it will not be making acquisitions and would concentrate its new expansion on its Wal-Mart Neighborhood smaller format stores going forward.

McDonald’s Corp. (NYSE: MCD) is another one higher on the day, by a sharp 1.5% at $76.90 and this is after investors sold shares off on a weaker than expected domestic same-store sales reading for February.  Even if the economy does hit skid row again, the obvious argument is that almost anyone that can be counted in the economy can afford McDonald’s in some form or fashion.

Another gainer in the trade-down economy is the dollar stores.  Dollar General Corporation (NYSE: DG) is up 0.3% at $28.08 and Dollar Tree, Inc. (NASDAQ: DLTR) is up 0.75% at $32.36.  Even Family Dollar Stores Inc. (NYSE: FDO) is up 0.15% at $50.60, and it still has somewhat of a built-in buyout premium in it.

There is still about 45-minutes before the close so we’ll wait to cast a final judgment on the day until the closing bells come in.  There is another sad thing that comes to mind when you see this trend taking place.  If it continues for a few more days, we’ll probably start to hear about the return of the double-dip recession all over again.

JON C. OGG