A Struggling US Economy and the Stocks that Love It

Federal Reserve chairman Ben Bernanke predicts the current recession could end this year. Perhaps this message accidentally went into the economy’s junk e-mail box. We’re over three months into 2009 and the economy continues to struggle. According to the U.S. Bureau of Labor Statistics, the unemployment rate has grown from 6.6% to 8.5% since October ’08, its highest mark since 1992. Retail sales are down almost 11% from a year ago. Core inflation has risen 1.8 percent in the past 12 months and 0.2 percent in March. This US economy update can be summed-up by a quote from the tv show Seinfield, “That’s not good for business. That’s not good for anyone.”

However, a few values can be discovered if you sift through the mess. We’ll start off in the food industry. It’s not like Americans need more reasons to stuff their faces with fast food, but due to the sagging economy, it’s becoming a good value and they’re flocking to them like lemmings to a cliff. McDonald’s stock price (MCD) has stayed consistent during this turmoil between $55-$65, probably due to it’s high-value dollar menu. Consumers can chose from a Double Cheeseburger, McChicken Sandwich, fries, soft drink, 2 pies, and sundae all for $1 each. Wow, your wallet can gain girth proportionally as you do.

In this economic crisis, consumers are choosing fast food chains over moderate to expensive restaurants. Burger King’s stock price (BKC) has risen to $23.56 from $17.33 in November as Brinker International, who owns restaurant chains including Chili’s has traded as low as $3.99 a share and has suffered a $22 million loss in 2009.

The US economy is also pushing consumers to used cars instead of a new car purchase. As new car sales have been struggling, certified pre-owned car sales have been climbing the past few months. Lexus was up 10.3% the first two months of 2009 compared to 2008. Mercedes-Benz vehicles were up 28% from a year ago as well. BMW has increased 12.5% and even Ford, the only US auto company not benefiting from federal aid, was up 10.8%. March was the 17th consecutive month that new-vehicle sales dropped. Toyota, Nissan, and Honda sales have all fell at least 36%.

The video game industry is also worth watching in this economy. Not only is the number one game maker, Electronic Art’s stock price (ERTS), in a steady decline from $48.97 to its current price of $19, the video game market as a whole is down 17% from April 2008. Conversely, Game Stop (GME), which conducts a good portion of its business in used video game merchandise, has increased from $17.50 in November to as high as $32.42 in April.

Consumers are also staying away from high-end retail stores such as Nordstrom (down 8.5% in ‘09), Coach (down 14% in ‘09), and Tiffany Co. (down 20% in ‘09), in favor of lower-priced bargain stores such as Wal-Mart and Wal-Mart owned Sam’s Club. Wal-Mart’s stock price (WMT) traded evenly between $47-$57 in ‘09 as sales increased 1.4%. Sam’s Club sales have increased 6.2% from last year.

So, if you have learned anything from this US economy update, you’ll be feasting on a double cheeseburger, rocking out to ACDC on a pre-owned guitar hero video game, watching falling prices at Wal-Mart, and cruising around in style in your used Ford Focus. Enjoy the deals in this struggling US economy.

Gregg Andreski