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Tickers in this Article: WMK, STZ, CHD, BF.B, WFMI
PIMCO's brilliant-minded Bill Gross and Mohamed El-Erian have recently bestowed on the United States economy a period of "new normal". They predict the economy will face an extended period of slow growth due to U.S. consumers and households unwinding their large debts. The PIMCO analysts are concluding that all this debt reduction will cause slower growth in the economy, as well as lower the returns for stocks overall. This notion stems from a Keynesian idea that the level of economic activity in a set economy is determined by aggregate demand - in this case, how much American consumers, governments and foreigners are willing to buy.

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It's All About The Consumer
Household spending accounts for nearly two-thirds of the United States GDP. While patrons' attitude is slightly improving from when the crisis first took hold, the number is still in the doldrums. Consumers' assessment of current conditions worsened in October. The Conference Board's latest October numbers paint a grim picture with those surveyed claiming business conditions are "bad" increasing from 46.3 percent to 47.1 percent, and those claiming that jobs are "hard to get" increasing from 47.0 percent to 49.6 percent. Overall, of those surveyed, many expect the economy to worsen in the next year. The trick to all of this doom and gloom is finding stocks that will continue to thrive in a depressed consumer market. Companies that provide "sub-premium" brands and home gourmet experiences have thrived in this era of thrift, and they will continue to do so if the economy stays in its "new normal" projection.

The Portfolio Plays
Constellation Brands (NYSE: STZ) controls about 15% of the United States wine market. With wine brands such as Arbor Mist, Ravenswood and Woodbridge under its umbrella, Constellation has profited from the trend of consumers moving down to mid-tier brands. The stock trades at a significant discount to its peers, such as Brown-Forman (NYSE: BF.B), despite the company's leading market share and profit margins of about 20%. The company also has a nearly 50% stake in global beer distributor Crown Imports, which should help Constellation command a more premium price.

While most of the market focuses on high-flying, growth-oriented supermarkets like Whole Foods Market (Nasdaq: WFMI), the traditional grocery store is still alive and well in America. With no debt and a 3.3% dividend yield, Pennsylvania's Weis Markets (NYSE: WMK) could make a compelling portfolio addition. The company has managed to entice customers with its loyalty programs and lowered prices. Aside from its 154 regular retail locations, the company has a unique bargaining chip - 27 SuperPetz stores. This brand could potentially benefit the company in a sale or possible spinoff to shareholders.

Consumers have traded down in consumer products in addition to beverage choices, and this has benefited Church & Dwight (NYSE: CHD), makers of Oxy Clean and Arm & Hammer products. During the recession, the company ramped up advertising for Arm & Hammer products, emphasized value and helped deliver double-digit sales gains for the past 12 months. With the company's recent earnings report, it stressed strong earnings and revenue numbers that beat Wall Street's expectations. In addition, Church & Dwight highlighted increased guidance and raised the stock's dividend, now paying 1% to shareholders. (Learn more about dividends in The Importance Of Dividends.)

Bottom Line
As the economy seems to have entered a new normal age of "cheap", consumer stocks that address this thriftiness will continue to profit. Constellation Brands, Weis Markets and Church & Dwight have greatly benefited from this shift in consumer spending and confidence. All three would make worthwhile portfolio additions to address this trend.

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