PowerRatings Stock Spotlight: 99 Cent Stores

These are difficult times for many Americans. A slowing economy, fewer jobs and high debt levels have forced many to skimp and spend much less extravagantly.

However, shoppers still shop, albeit often at a lower level than the pre-economic slowdown. This common sense idea guided me to look into low priced retailers, hypothesizing that they should be thriving in these conditions. I weeded through several, drilling down to the lowest of the low priced operations - single low priced retailers. Further research revealed our Long Term PowerRating Stock of the week, 99 Cent Stores (NDN | Quote | Chart | News | PowerRating).

It's been said the cockroach will be the last creature surviving on earth, the 99 Cent Stores, will likely be the last retailer surviving a long term economic disaster, as the price point is so low everyone can and will shop there almost regardless of economic circumstances. Let's take a closer look at this recession thriving retailer.

99 Cent Stores were started in 1982 and have since grown to a chain of 277 stores located in the western United States. They are built to be a full service destination shopping experience and just not a store full of trinkets. They sell produce, deli, consumer staples, grocery items and household supplies. These are often close out brand name items and assorted other quality products.

Fundamentally, the company appears to be thriving with solid fiscal 2nd quarter results. Retail sales increased by 9.2%, Gross Margin increased by 150 basis points and product costs decreased by 170 basis points. It's important that investors note that these numbers are after the executive decision was made to pull out of the Texas market. The CEO Eric Schiffer has given very positive guidance for the future; however, he did announce a small price increase of almost 0.01 cent!

Showing a great sense of humor and irony, the store located in the bastion of luxury and excess, Beverly Hills, California, is the number one performing store in the chain. Technically, the shares are in a raging uptrend, hitting an all time high yesterday. Price is nicely above the 50 and 200-day simple moving averages and appears poised for further advances.

However, unfortunately, this company has not received a great Long Term PowerRating. It has earned a 3 ranking which is the top number in the "expected to underperform category". Our Long Term PowerRatings are based on 12 years of statistically valid studies across most market conditions. Those stocks earning top ratings have a 79.1% chance of being higher one year later, and the lower rated stocks have proven to generally be too volatile, thus risky for prudent and conservative long term investment. This company definitely looks good; however, the Long Term PowerRatings urge caution prior to considering it for your long term portfolio.

Learn what you need to know as an active investor looking to invest in companies with a history of financial strength and a track record for growth. Click the link above or call us at 888-484-8220 extension 1 to get your copy of the "5 Secrets to Successful Stock Investing" today!

David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.