BALTIMORE (Stockpickr) -- The weak economic data hitting Wall Street continued to push investors away from risky assets -- such as stocks -- last week, and into safer, less-volatile instruments such as bonds, gold and U.S. government debt. All the while, a handful of cash-rich firms have been taking advantage of depressed equity prices by going on a buying spree.
If Monday's lower market open is any indicator, companies looking for
won't be disappointed heading into the last few trading days of August.
Investors would do well to use that mentality when approaching this market. While traders are ruling the roost in the short-term, taking advantage of short-term price volatility, there are more than a few emerging opportunities for value investors available right now. We'll attempt to uncover more than a couple of them today with our newest batch of Rocket Stocks plays.
For the uninitiated, Rocket Stocks are our weekly list of companies with short-term gain catalysts and longer-term growth potential. In the last 58 weeks, Rocket Stocks have outperformed the S&P 500 by 62.87%.
First up this week is
, a perennial favorite Rocket play over the course of the last year. The main reason for our infatuation with this dollar store competitor is recession resistance. With a large footprint in the deep discount retail market, this stock is able to cater to more customers who want to buy the necessities at the lowest possible cost.
Dollar General has been working hard to eke out impressive performance over the course of the last few years, and the recession of 2008 has proven to be the catalyst to do just that, providing incremental revenue growth and the opportunity to implement new point-of-sale technologies that increase the flexibility of consumers' pocketbooks. As the economy improves, Dollar General is expanding its margins and proving the Wall Street that management is capable of building on the successes of 2009.
With a large debt load, Dollar General's recessionary prowess has been somewhat offset by the chances that its thin margins wouldn't be able to meet obligations. But the company has continually delivered EBIT at a nice multiple to interest expense. As a result, I'm confident in Dollar General's ability to meet its creditors' needs in 2010. The company is set to announce earnings tomorrow.
Another well-known consumer stock that's made our Rocket Stocks list in the past is
. The $12.7 billion food-processing giant may be best known for its soup, but that's far from its only business. Over the years, Campbell has expanded its brand portfolio to include pantry favorites such as Pepperidge Farm, Prego and V8.
But Warhol never painted a bottle of V8, and Campbell's Soup continues to be the profit-driver for this firm. Campbell controls more than 80% of the condensed and 70% of the ready-to-go soup segments, making the company the clear leader in its category. Those soup lines offer thick margins predicated on a trusted brand name that's been around since 1889.
Because of its sheer size, rival soup companies have long seen Campbell as the competitor to unseat, and competition remains fierce in this multi-billion segment of the food industry. We'll get a glimpse at whether Campbell has held its spot when the company announces earnings on Sept. 3.
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Competition is equally fierce -- albeit less fragmented -- in the tax business. After all, with nothing certain but death and taxes these days, the question consumers are posed with each year is which preparation service will lend them a hand at navigating the incredibly complex U.S. tax code. One of the giants in this space is
H&R Block has more than 12,000 offices nationwide, as well as a large share of the do-it-yourself tax software market. Together those offerings have helped the company claim 15.5% of tax filers as customers. But crowding in from the likes of
(INTU) as well as new tactics from brick-and-mortar tax services are pressuring the company's impressive margins.
So is risk and new government regulations. While the company had been involved in mortgage lending, it exited the business at the height of the credit crunch opting instead to focus on its more stable, but less lucrative tax preparation business. Likewise, recent reforms have restricted H&R Block's ability to offer tax refund advances, loans made to customers in anticipation of their refunds from Uncle Sam. Still, this firm has enough wherewithal to hit our radar ahead of earnings on September 2.
Who Owns H&R Block?
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At the time of publication, author had no position in stocks mentioned.
Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.