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The Ten Companies That Will Lead The US Out Of The Recession

There are an extremely small number of companies likely to do relatively well during the recession, either because they are the market share leaders in their industries by a wide margin, or they are in businesses that sell products and services that are a necessary part of everyday life. The signals of a recovery will probably come from companies that are No. 2 or 3 in their industries. It will be telling if they can begin to show even slightly improving trends operating in the shadow of larger competitors. The other area of corporate America worth watching is the sectors that have done substantially worse than most, which includes airlines, automobiles, and media companies.

Looking though a list of some of America’s largest companies to find firms which fit these descriptions, 24/7 Wall St. identified ten companies to watch for signs of an economic recovery. A reasonable quarter or a slightly better-than-expected outlook from some of these companies should show that the recession is coming to a close.

Some of the companies on this list may surprise you:

Wal-Mart (WMT) recently announced that its same store sales in January were up 2.1%, which was more than forecast. With the company’s huge network of stores and ability to strong arm suppliers, Wal-Mart offers shoppers good merchandise at prices which becomes more and more attractive as the downturn continues.

McDonald’s (MCD) says its same-store sales are holding up fairly well. Its “value meal” concept is likely to keep customers returning to its restaurants for plentiful and inexpensive food.

Colgate (CL) sales have also held up well as the recession has deepened. People are going to buy toothpaste and shampoo unless they are completely out of money.

Over the last year, shares of Colgate, Wal-Mart, and McDonald’s have significantly outperformed the DJIA.

Target (TGT) This chain remains an example for the better-run and stronger balance sheet retail operations in the US. Its revenue last year was $63 billion compared to Wal-Mart’s $378 billion.

Starbucks (SBUX) The coffee store chain has cut out enough locations and employees so that it no longer saturates the markets where it does business. If it has done this correctly, Starbucks stores will not be competing with one another for the same customers.

CBS (CBS) can still put shows on the air that attract more than 15 million viewers. It is hard for any medium other than broadcast television to be able to give marketers that kind of tonnage. Unlike ABC or NBC, which are parts of companies in a number of other media businesses, CBS is a broadcasting “pure play.” Once CBS’ advertising rates begin to recover, it will mean that marketers are prepared to spend to bring in new customers.

Ford (F) still insists it will not need government funds to get through a restructuring and return to profitability. Among The Big Three, Ford  has  the best balance sheet. Because it is has not taken money from TARP, it is also probably viewed as “safer” by consumers who may worry about whether their warranties will be honored.

American Airlines (AMR) has been buffeted between high fuel costs in the summer and low passenger traffic since the holidays when the recession diminished air travel. The airline does not need to stop losing passengers to signal a recovery. If the rate of the drop-off begins to slow significantly, travelers are heading back to the skies.

Dell (DELL) is viewed as the weakest of the US PC companies. Dell is up against HP and competes with Apple, which has a fiercely loyal customer base that has helped it gain market share over the last two years. Apple’s sales are not a good indication of how IT spending is moving. Mac sales can defy gravity if the force is not too great. If Dell begins to see an increase in demand, people are back in the market for modest-priced PCs, which is the largest part of the market.

Yahoo! (YHOO) is probably still the leader in display advertising revenue among US websites. It runs a distant second to Google in the much more profitable search ad business. As the online ad industry begins to recover, Yahoo! will be able to tell shareholders that its search revenue has become more robust. If display advertising begins to recover a few months later, marketers will be returning cautiously back into the market. Advertising gets cut in a recession and put back into budgets as conditions recover.

E*Trade (ETFC) is the weakest member of the three big discount brokerage firms. The company added over 76,000 new customers in the last three months of 2008, but assets per customer dropped 23% to under $35,000 because of the falling market. When that asset per customer number begins to rise, even modestly, more investors will be starting to make money in the market or put more money into their accounts in the hope of catching a recovery in stocks.

Staples (SPLS) is where small businesses go to buy inexpensive office supplies. With 2,000 stores worldwide, Staples is a near-perfect proxy for small business spending. The day the firm says it expects a rebound in sales and earnings is the day economists will believe that the millions of companies no one sees or talks about are contributing to improving GDP.

Electronic Arts (ERTS), the largest maker of video games, has fallen on hard times. The firm ships games that sell millions of copies and make EA a very good barometer for consumer electronics spending. The company expects revenue for its fiscal year ending March 2010 to be flat with this year. When that figure starts to grow again, it will be a significant sign that consumer electronics discretionary spending is improving.

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03/19/2009 - Posted by | jobs | , ,

1 Comment »

  1. […] The Ten Companies That Will Lead The US Out of the Recession […]

    Pingback by Ths Week’s Top Posts (w/e 3/21/09) « The Job Exchange | 03/22/2009 | Reply

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