Uncertain Economic Outlooks Play Well for Discount-Themed Plays

With high inflation, rising interest rates, and a geopolitical drama unfolding, there’s a lot of uncertainty in markets right now. It may not take much for the economy to potentially slip into a recession, even as some see low odds of that occurring.

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  • When markets get uncertain, investors get defensive. One way to stay on the offense is to buy companies that have built a business model around being a discount player.

    In the retail space, one such name is Dollar General (DG). The discount retailer is part grocery store, part general store, and focused on providing low prices. That’s likely why the company continues to grow its earnings per share in the 12-14 percent range, and expects to see sales growth hit a 10 percent rate this year.

    Even with solid growth, and with shares up 18 percent over the past year, the stock trades at just under 20 times earnings, and could see further growth during a slowing economy as consumers spend more at discounted stores.

    Action to take: Shares look capable of further rising from here, given their current growth trend and their likely performance in a recession. Investors can get a starting dividend yield of 0.8 percent, which was recently raised and has room for future growth.

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  • For traders, the June $250 calls, last going for about $2.70, offer mid-double-digit returns  in the months ahead.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.



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