Zacks Investment Ideas feature highlights: Ross Stores, Apple, Plains All-American Pipeline LP and Yum! Brands

CHICAGO, Oct. 13, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Ross Stores (Nasdaq: ROST), Apple (Nasdaq: AAPL), Plains All-American Pipeline LP (NYSE: PAA) and Yum! Brands (NYSE: YUM).

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How to Invest in an Anemic Economy

For the last several months U.S. consumers have become increasingly pessimistic about the state of the economy, but so far this hasn't been reflected in their spending. The last time this happened was in the summer of 2008, right before retail sales fell off a cliff. But that likely had more to do with the financial crisis than anything else.

So how should an investor position his or her portfolio in an economy that might just crawl along? There are a few places to be:

• Value-oriented Retailers: Sluggish economic growth means the unemployment rate likely won't come down by any meaningful amount for a painfully long time. This means stagnant wages and tight household budgets for the middle class. As a result, people will hunt for bargains at stores that provide the lowest prices. This is really a continuation of a trend since consumers traded down to value-oriented retailers en masse during the Great Recession and never seemed to leave.
• Companies with Wide Moats: Just like a moat would protect a castle from invasions, an economic moat protects a company from competitors who try to steal market share and shrink profits. Companies who can sustain their competitive advantages over time should provide their shareholders with above-average returns, even if the economy is just sputtering along.
• Dividend Stocks: The yields on bonds and cash are ridiculously low right now and will remain that way for the foreseeable future as the Fed maintains its historically accommodative monetary policy. This makes the yields on some dividend stocks look very attractive. Companies with solid balance sheets, strong cash flows and a history of dividend hikes are the ones to watch for.
• Emerging Markets: Growth opportunities may be muted in the developed economies, but a burgeoning middle class in some emerging markets presents tremendous opportunities. Many U.S.-based companies have seen this trend coming for years and have already established a significant presence overseas that will continue driving their profits forward at a healthy clip.

Here are 4 companies to own in a slow-growth economy:

Value-oriented Retailer:

Ross Stores (Nasdaq: ROST)

Ross Stores is an off-price retailer that offers brand name merchandise at a significant discount to their full-priced competitors. Earnings estimates have risen considerably over the last several months as Ross continues to post strong same-store sales growth, even though the U.S. has technically been out of the Great Recession for more than 2 years. It is a Zacks #2 Rank (Buy) stock.

Wide Moat Business:

Apple (Nasdaq: AAPL)

People from age 8 to 88 seem to go nuts over Apple's products no matter what the economy is doing. Consumers are willing to pay a premium for gadgets with the letter "i" in front of their names, and big market share opportunities exist for the company in computers, smartphones and tablets. The company hasn't missed on earnings in over 7 years. It is a Zacks #2 Rank (Buy) stock.

Dividend Stock:

Plains All-American Pipeline LP (NYSE: PAA)

Plains All-American Pipeline is a master limited partnership (MLP) that provides transportation, storage, terminaling, and marketing services for crude oil, refined products and liquefied petroleum gas. Plains pays a distribution that yields a juicy 6.4%, and the company has raised it every year since going public in 1998, even during the Great Recession. That seems much more attractive than a fixed 2.2% on a 10-year T-note. Plains has also delivered 4 consecutive positive earnings surprises and is a Zacks #1 Rank (Strong Buy) stock.

Emerging Markets Exposure:

Yum! Brands (NYSE: YUM)

Yum!, which operates the KFC, Pizza Hut and Taco Bell restaurant chains, has been struggling with stagnant growth in the United States...but not in the emerging markets. The company's China division has been surging and now accounts for 43% of total revenues (and 53% of operating profits). This is expected to drive double-digit earnings growth for the company over the next several years. Yum! has also beat earnings estimates in 27 out of the last 28 quarters. It is a Zacks #3 Rank (Hold) stock.

The Bottom Line

While economic growth in the U.S. appears to be sluggish at best, there are still opportunities to earn strong returns with stocks. These 4 companies are each well-positioned to do just that.

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