BOSTON ( TheStreet) -- Corporate profits are soaring, but that's not enough for investors.S&P 500 companies boosted second-quarter earnings by 34%, analysts surveyed by Bloomberg estimate, and almost two dozen will publish results this week. Investors, ultimately, are concerned about a double-dip recession. Here are three stocks that thrive on fear. They have outperformed stock-market indices in 2010 because they operate in industries that tend to do well regardless of the economic climate. 3. Vector Group ( VGR) sells cigarettes.
2. Family Dollar Stores ( FDO) sells discounted apparel, foods and household products.
Quarter: Fiscal third-quarter profit increased 19% to $104 million, or 77 cents, as revenue extended 8.4%. The operating margin rose from 7.5% to 8.5%. Family Dollar has $445 million of cash and $250 million of debt, equaling a debt-to-equity ratio of 0.2. Stock: Family Dollar has advanced 30% in 2010, beating the S&P 500 by 34 percentage points. It lagged the index in 2009. Family Dollar sells for a PEG ratio, a measure of value relative to predicted long-run growth, of 0.6, a 40% discount to fair value. Consensus: Of researchers following Family Dollar, 15, or 54%, advocate purchasing its shares, 11 recommend holding and two suggest selling them. Deutsche Bank ( DB) expects the stock to rise 33% to $48. Citigroup ( C) offers a target of $47.
1. AutoZone ( AZO) sells replacement car parts.
Quarter: Fiscal third-quarter profit increased 17% to $203 million, or $4.12, as revenue grew 9.9%. The operating margin rose from 18% to 20%. AutoZone has $96 million of cash, equaling a low quick ratio of 0.1. The company has $2.7 billion of debt. Stock: AutoZone has advanced 28% in 2010, far outpacing the S&P 500. It trailed the index in 2009. AutoZone trades at a price-to-projected-earnings ratio of 12 and a price-to-cash-flow ratio of 8.4, 23% and 31% discounts to peer averages. Consensus: Of firms evaluating AutoZone, 10, or 34%, rate its stock "buy" and 19 rank it "hold." None rate the stock a "sell." Raymond James ( RJF) offers a target of $230, implying that 13% of upside remains. UBS ( UBS) values the stock at $215.
-- Reported by Jake Lynch in Boston.
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