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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. (NYSE:RL), Coach Inc. (NYSE:COH), Sotheby's Holdings Inc. (NYSE:BID), and Tiffany & Co. (NYSE:TIF). UBS strategist Tom Doerflinger assembled a similar list, including: Best Buy Co. Inc. (NYSE:BBY), Nordstrom Inc. (NYSE:JWN), Simon Property Group Inc. (NYSE:SPG), American Express Company (NYSE:AXP), Whole Foods Market Inc. (WFMI), Starbucks Corp. (NASDAQ:SBUX), Constellation Brands Inc. (NYSE: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 (NYSE:GPS) Banana Republic, J.C. Penney Company Inc. (NYSE:JCP), and Kohl's Corp. (NYSE: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. (NYSE:FDO), Big Lots Inc. (NYSE:BIG), and payday lenders EZCORP Inc. (NASDAQ:EZPW) and First Cash Financial Services Inc. (NASDAQ:FCFS).
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