Dollar Tree (DLTR)

[chmcnfunds]

3 Companies to Survive the Fiscal Cliff
By Adam Levy - November 28, 2012

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

I feel like the only thing I hear about in the news is the fiscal cliff. I always imagine Road Runner cartoons when I hear the term. You know, Road Runner can run so fast, he runs right over the cliff, and Wile E. Coyote just plummets to the bottom of the canyon. There’s still hope that the government can build up enough steam to get us over the cliff, but in the case the government is using Acme products to try and build a bridge and we go off the cliff, here are three companies that will help protect your portfolio.

Dollar Tree (NASDAQ: DLTR)

You’ve probably seen this one before, and everyone has an opinion on dollar stores. My opinion is Dollar Tree is one of the best in the industry. It proved in 2008 and 2009 that it does well in tough economic times, and if taxes appreciate, consumers will spend less just as they did four years ago.

Dollar Tree has been consistently profitable, operating with relatively high net profit margin. Moreover, it has improved its profitability each year since 2008, growing from a net profit margin of 4.7% to 8.2% in the last twelve months. Meanwhile competitors, Family Dollar (NYSE: FDO) seems to have stagnated at a margin of 4.5% since 2010.

The company also has consistently high ROE, returning greater than 18% in 2008 and increasing that number every year resulting in a fantastic ROE of 39.3% in the trailing twelve months. Family Dollar has done well achieving an ROE of 33.9% in the last twelve months and 35.4% the year before, but has done so with a significantly higher Debt to Equity ratio compared to Dollar Tree (39.8% vs 16.2%).

In October, a weak outlook by the company sent shares plummeting below $40, 35% below the company’s all-time high set in June. At today’s price around $42, I believe you can still pick up a great long-term investment that will do particularly well if we head over the cliff.
______________________________________________________
http://beta.fool.com/adamlevy/2012/11/28/3-companies-survive-fiscal-cliff/17432/?ticker=AZO&source=eogyholnk0000001

DLTR