Four Companies Growing as Economy Sinks

Billionaire Warren Buffett says investors should buy stocks they understand and companies with competitive advantages that will help them grow in a limp economy.

With that in mind, here are four companies I rated "buy" in 2008 that I remain optimistic about this year. These companies operate in transparent markets and have strong financial positions, which we believe will help them outperform competitors and major indexes.

Green Mountain Coffee Roasters (GMCR Quote) is benefiting from the decline of Starbucks (SBUX Quote). The company sells brewers to homes and offices "at cost," but profits from the "K-Cups," single-serving coffee packs, the machines use. As the economy weakens, office workers are choosing free coffee over $5 lattes. That shift helped boost the company's first-quarter net income 392% as its revenue jumped 55.8%. The stock has gained 12.4% in the past six months.

Ralcorp (RAH Quote) is the largest U.S. producer of store-brand, or "generic," food and goods. As the recession crimps household budgets, consumers will buy cheaper brands to save cash. Ralcorp's revenue and earnings grew substantially during 2008 and the first quarter of 2009. The company added some more-profitable products with the acquisition of Post cereals from Kraft Foods (KFT Quote) last year. The company's 0.62 debt-to-equity ratio reflects its low debt, and its strong cash reserves are evident in its current ratio of 1.33, a measure of liquidity. The stock has risen 13.7% in the past year and 4% in the past six months. The shares could climb even more.

The Buckle (BKE Quote) shares are a steal at $25. This denim retailer has increased revenue, earnings and same-store sales during the worst downturn since the Great Depression. The company's same-store sales rose between 13.5% and 19.7% each month from September to January, beating every other major U.S. retailer. The company has a strong cash position, reflected by a 2.95 current ratio, and zero debt. It's trading below its 52-week high of $44.57. The Buckle is flourishing. Denim is still in. Consider this stock.