12 ways to profit from the middle class recession diet

Posted Apr 26th 2008 5:26PM by Peter Cohan
Filed under: Forecasts, Consumer Experience, Wal-Mart (WMT), Starbucks (SBUX), Marketing and Advertising, Money and Finance Today, Domino's Pizza (DPZ), Kohl's Corp (KSS), Ruth's Chris Steak House (RUTH), Economic Data, Stocks to Buy, Stocks to Sell, Recession

The New York Times reports that Americans in the economic middle are eating pasta instead of meat and staying at Hampton's Inn instead of Hilton as they try to keep their families together in the face of flat income and skyrocketing costs. As a result, some companies are suffering and others are benefiting. Let's look at two that are benefiting and 10 that are hurting:

Here are two companies that are doing better thanks to their lower prices:

TJX Co.'s (NYSE: TJX)
Wal-Mart Stores, Inc. (NYSE: WMT)

Here are 10 that are hurting because people can't afford to go out to restaurants and buy expensive clothes:

Bob Evans Farms (NYSE: BOBE)
Denny's (NASDAQ: DENN)
Domino's Pizza (NYSE: DPZ)
J.C. Penney (NYSE: JCP)
Kohl's (NYSE: KSS)
Macy's (NYSE: M)
Morton's Restaurant Group (NYSE: MRT)
Ruby Tuesday (NYSE: RT)
Ruth's Chris Steak House (NYSE: RUTH)
Starbucks (NASDAQ: SBUX)

Investors may want to consider whether to invest in the winners and sell short or simply avoid the losers. And if you're among the pasta eaters -- you'll need to find an inexpensive way to exercise more. Comment below if you want help analyzing these stocks.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Reader Comments (Page 1 of 1)

4-27-2008 @ 2:01AM

Raymond Hannon said...

Consumption of gasoline is likely to continue an upward trend, even at $5.00 per gallon as is forseen for next year. Gas and beer are the two liquids Americans will always buy. Price does not determine consumption. Food, however, is not so elastic. It's going to take some sharp shopping to offset rapidly escalating food cost.

4-27-2008 @ 7:34AM

Michael Schneider said...

Pat Dorsey of Morningstar noted yesterday on Bulls & Bears that their studies show that after the last rebate several years ago, restaurant stocks were where people spent the most of their rebate checks. He said restaurant stocks have already moved in anticipation of the rebates. I don't think he is right in thinking that the same thing will happen this time but there is some risk to shorting some of the restaurant stocks on your list because of the rebates.

I post stocks recommended from the Fox business block shows including Bulls & Bears each week in the Weekend Stock Review (white label, right side) at http://www.Barrelomoney.com. I don't post commentary on other matters, just the stock picks and comments about them- along with Barrelomoney comments. Anyway I think both Wal-Mart and TJX are great selections as rebate plays and people (last minute filers) will also still be getting refunds as well. Many stores such as Supervalue and Home Depot are offering special deals for people who cash rebate checks in their places though- that could somewhat undercut the success Wal-Mart had last time with the rebates but Wal-Mart will be okay anyway.

4-27-2008 @ 9:44AM

Petkov said...

Modern "Capitalism" is nothing more than gambling. It's not about creating and selling a *useful* product. It's all about betting and hoping your bet is correct.
How sad.