The Growing Gap Between Rich and Poor: Recipe for Disaster?
The widening gap between the nation's rich and poor is leaving the U.S. economy more vulnerable to recurring financial crises and less likely to generate enduring expansions, reports Bloomberg.
The Occupy Wall Street protesters' chant of "we are the 99%" is a rising tribute to the unequal distribution of wealth. Social disparity aside, American businesses and the economy have been structured around a system in which the majority of members have free flow income.
Increased inequality therefore shakes the foundations of economic growth and can ultimately affect the "haves" in ways similar to the "have nots."
"Left unchecked, the decades-long trend toward increasing inequality may condemn Wall Street to a generation of unimpressive returns and even shake social stability, economists and financial-industry executives say."
Bloomberg reports that between 1993 and 2008, the top 1 percent of families captured 52 percent of total income gains, according to a 2010 analysis of Internal Revenue Service tax data.
Furthermore, in the 30-nation Organization for Economic Cooperation and Development, only Turkey and Mexico have more unequal societies than the United States.
The 9.1% unemployment rate has not helped either, and many are of the opinion that it would take drastic political changes to fully address the issue and reduce the nations' vulnerability to market shocks.
In light of this sullen news, here is a list of companies that serve the shopping, health care, and financial needs of low-income families.
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Wal-Mart Stores (NYS: WMT) : Discount, Variety Stores Industry. Market cap of $189.63B. Price as of Oct. 14, 2011 at $55.46. The stock has gained 6.07% over the last year.
Operates retail stores in various formats worldwide. It provides grocery merchandise, entertainment merchandise, hardware merchandise, apparel merchandise, home merchandise as well as a variety of health and wellness merchandise and services.
2. Dollar General (NYS: DG) : Discount, Variety Stores Industry. Market cap of $13.26B. Price as of Oct, 14, 2011 at $39.33. The stock has gained 33.9% over the last year.
Its merchandise includes national brands from manufacturers, such as Procter & Gamble, Kimberly Clark, Unilever, Kellogg's, General Mills, Nabisco, Coca-Cola and PepsiCo, as well as private brand selections. It offers its merchandise at everyday low prices through its convenient small-box (approximately 7,200 square feet) locations.
3. Family Dollar Stores (NYS: FDO) : Discount, Variety Stores Industry. Market cap of $6.49B. Price as of Oct. 14, 2011 at $54.4. The stock has gained 19.69% over the last year.
Its merchandise assortment includes consumables, home products, apparel and accessories, and seasonal and electronics. Family Dollar store is between 7,500 and 9,500 square feet. Its stores are located in urban, suburban, small town and rural markets. Its stores operate on a self-service basis, and its low overhead enables it to sell merchandise at a moderate markup.
4. AMERIGROUP (NYS: AGP) : Health Care Plans Industry. Market cap of $2.13B. Price as of Oct. 14, 2011 at $42.86. Might be undervalued at current levels, with a PEG ratio at 0.72, and P/FCF ratio at 5.73. The stock has lost 0.26% over the last year.
As of December 31, 2010, the Company provided a range of products to approximately 1,931,000 members in Texas, Georgia, Florida, Tennessee, Maryland, New Jersey, New York, Nevada, Ohio, Virginia and New Mexico.
5. Cash America International (NYS: CSH) : Credit Services Industry. Market cap of $1.68B. Price as of Oct. 14, 2011 at $56.64. Might be undervalued at current levels, with a PEG ratio at 0.94, and P/FCF ratio at 5.09. The stock is a short squeeze candidate, with a short float at 13.1% (equivalent to 10.26 days of average volume). The stock has had a couple of great days, gaining 5.77% over the last week.
These services include secured non-recourse loans, commonly referred to as pawn loans and unsecured consumer loans. Its consumer loan portfolio includes short-term single payment loans, longer-term multi-payment installment loans, credit services and participation interests purchased from third parties in the micro line of credit (MLOC) services channel.
6. 99 Cents Only Stores (NYS: NDN) : Discount, Variety Stores Industry. Market cap of $1.52B. Price as of Oct. 14, 2011 at $21.56. Exhibiting strong upside momentum -- currently trading 9.42% above its SMA20, 14.99% above its SMA50, and 15.14% above its SMA200. The stock has had a couple of great days, gaining 7.68% over the last week.
Merchandise sold in its 99 Cents Only Stores is priced at or below 99.99 Cents per item. As of April 2, 2011, the Company operated 285 retail stores with 211 in California, 35 in Texas, 27 in Arizona, and 12 in Nevada. It also sells merchandise through its Bargain Wholesale division at prices generally below normal wholesale levels to retailers, distributors and exporters. Bargain Wholesale represented 3.1% of the Company's total sales in fiscal 2011.
7. EZCORP (NAS: EZPW) : Specialty Retail, Other Industry. Market cap of $1.46B. Price as of Oct. 14, 2011 at $28.85. Might be undervalued at current levels, with a PEG ratio at 0.86, and P/FCF ratio at 12.22. The stock has performed poorly over the last month, losing 11.72%.
It also operates short-term consumer loan stores in the United States under the EZMONEY brand and in Canada under the CASHMAX brand. As of September 30, 2010, the Company had 390 locations in the United States.
8. Avista (NYS: AVA) : Diversified Utilities Industry. Market cap of $1.42B. Price as of Oct. 14, 2011 at $24.94. The stock has gained 19.14% over the last year.
Avista Utilities generates, transmits and distributes electricity and distributes natural gas. It also engages in wholesale purchases and sales of electricity and natural gas. Advantage IQ, provides energy management programs and services for multi-site customers and utilities throughout North America. Its other investments and operations include real estate investments in technology venture capital funds and low income housing.
9. DFC Global (NAS: DLLR) : Credit Services Industry. Market cap of $966.44M. Price as of Oct. 14, 2011 at $22.48. The stock is a short squeeze candidate, with a short float at 6.85% (equivalent to 6.34 days of average volume). The stock has gained 42.73% over the last year.
Through its retail storefront locations, as well as by other means, such as via the Internet, it provides a range of consumer financial products and services in five countries, Canada, the United Kingdom, the United States, the Republic of Ireland and Poland, to customers who purchase some or all of their financial services from the Company rather than from banks and other financial institutions. Its products and services, principally its short-term consumer loans, check cashing services, secured pawn loans and gold buying services, provide customers with access to cash for living expenses or other needs.
10. Advance America, Cash Advance Centers (NYS: AEA) : Credit Services Industry. Market cap of $502.94M. Price as of Oct. 14, 2011 at $8.19. Might be undervalued at current levels, with a PEG ratio at 0.76, and P/FCF ratio at 3.78. The stock has had a couple of great days, gaining 9.66% over the last week.
As of December 31, 2009, the Company operated 2,553 centers in 32 states in the United States, 21 centers in the United Kingdom, and 13 centers in Canada, and had 71 limited licensees in the United Kingdom. Cash advances are typically small-denomination, short-term, unsecured advances that are due on the customer's next payday. It does not provide pawn lending, title lending or similar services.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
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