The Economy Doesn't Matter To These Stocks: DG, FDO, ORLY, WMT

A good economy is certainly good for the stock market. Unfortunately, the reality of capitalism is that for all the good it does in terms of allocating capital to the most efficient sources, capitalism does come with setbacks. As the U.S. witnessed in 2008, some of those setbacks can be severe and prolonged.

Strong Economy Not Necessary

Every business wants to operate under a strong, growing economy; it's a tailwind that provides a great growth boost. However, since reality is such that no economy can remain consistently strong, investors can not rely on strong macro conditions. In any regard, investors should be focusing on the company and the quality of management first, and the macro situation second.

To be sure, weak economies always pose a degree of risk for companies, but there are businesses that continue to demonstrate they can prosper, whether or not the economy is strong. O'Reilly Automotive (Nasdaq:ORLY) is one of largest auto parts retailers in the U.S. Looking at O'Reilly's financial statements shows little indication that the economy suffered a heart attack in 2008. Net sales grew from about $3.5 billion in 2008, to almost $5.4 billion in 2010. Profits more than doubled from $186 million, to over $419 million over the same time period.

What Consumers Want
If you want to find out which companies are likely to continue to do well, just look at what consumers want and continue to buy; consider both individual and corporate consumers. Whether the economy is strong or weak, consumers are now very much interested in bargains, especially for basic commodity-like necessities.

Retailers like Dollar General (NYSE:DG) and Family Dollar (NYSE:FDO), which sell products like soap, towels, socks and other basics at rock bottom prices, are prospering and will continue to do so. Even certain food items can be bought for less at DG and FDO. With over 9,500 locations, DG has more locations than Wal-Mart (NYSE:WMT) and offers consumers the convenience of being nearby.

The reality is that no one really cares where they buy their brand of toothpaste or laundry detergent; all that matters is the price. Ultra discount retailers have managed to successfully compete with Wal-Mart on price and consumers continue to visit these stores, more and more.

The Bottom Line
Investors are better served by keeping things simple, especially when trying to navigate the choppy seas that characterize the current market environment. Look for businesses that create value or fulfill a need desired by today's consumer, then look for a good price point to investment. Add in a little patience and successful results are very attainable.