COVER STORY: Rich America, Poor America by Michael Santoli
Summary: The percentage of GDP attributable to corporate profits is near a multi-decade high. Corporate gains tend to benefit the affluent through strong dividend growth, capital-gains income and high-salaried jobs, while restraining working-class wage growth. Ajay Kapur of Citigroup calls such economic trends Plutonomy -- a global economy disproportionately geared to the rich. Citigroup has assembled a basket of 24 stocks that should benefit from Plutonomy, including: Four Seasons Hotel Inc. (FS), Polo Ralph Lauren Corp. (RL), Coach Inc. (COH), Sotheby's Holdings Inc. (BID), and Tiffany & Co. (TIF). UBS strategist Tom Doerflinger assembled a similar list, including: Best Buy Co. Inc. (BBY), Nordstrom Inc. (JWN), Simon Property Group Inc. (SPG), American Express Company (AXP), Whole Foods Market Inc. (WFMI), Starbucks Corp. (SBUX), Constellation Brands Inc. (STZ) and Merrill Lynch & Co. Inc. (MER). James Hurley, who follows the luxury sector for Telsey Advisory Group, says mid-tier companies like Gap's (GPS) Banana Republic, J.C. Penney Company Inc. (JCP), and Kohl's Corp. (KSS) will be hard-pressed to command prices near those of premium brands. But he does like the "cash-strapped" play, such as Family Dollar Stores Inc. (FDO), Big Lots Inc. (BIG), and payday lenders EZCORP Inc. (EZPW) and First Cash Financial Services Inc. (FCFS).
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