FOR SOME COMPANIES, THE RECESSION IS GOOD NEWS by Scott Budman
With tens of thousands of jobs cut in a single day, you might forgive a guy like Mike Morgan from reaching for a beer. And he still has a job. I met Mike while looking for bright spots in today’s economy, and he gave me an idea. I myself am not a betting man, but I think I know where to invest:
While companies all over the Silicon Valley (and the country) are cutting jobs, Netflix (NFLX) is going strong. It’s enjoyed hundreds of thousands of new customers over the last three months, and a 45 percent jump in profits. Oh, and a nice plot twist for investors as well: a 15 percent stock price hike in one day, leading to a 6-month high. All because Netflix sends movies to our homes — where, it seems, we’re more likely to stay these days, instead of venturing out into the cold, expensive world.
And while we’re at home, watching rented movies, we might want a snack. That’s where Hershey’s (HSY) comes in. Profits at the food giant are way up as well. No layoffs, just a bottom line bump, and a sharp spike in its share price.
Then, after the credits roll, how about pulling out the Wii? Video game sales are still strong, as “staycations” mean more than just playing with the family pet. Gamers know the bang for the buck they get for a Wii or XBox 360 title, and they’re still willing to pay up for a good time.
Also on the rise: McDonald’s (MCD). If people are venturing out to eat, they’re doing it close to home, and cheaply. The fast food giant is filling that need very nicely, thank you, reaping big profits along the way.
Still, just because something is fun, or tasty, doesn’t make it a good investment. Lots of people touted Krispy Kreme (KKD) as a sure winner, until we realized that it was not managed all that well. Ditto for Starbucks.
But, take a well-managed company that makes us feel good for not all that much money, and you just might have a rare recession-beater.
And who wouldn’t drink to that?