It's been a challenging few months, and there may be more problems ahead. It's getting more difficult to find potentially winning stocks in this market, cautions Glenn Rogers, contributing editor to Internet Wealth Builder.

But Christmas is coming, and it's never a good idea to bet against American consumers. They may pull back, they may downgrade, but they will keep shopping, especially at this time of year.

So, we thought it would be a good idea to look at a couple of the discount retailers that are likely to benefit from a more cautious consumer. These are The TJX Companies, Inc. (TJX) and Ross Stores (ROST). Both tend to do well when the economy is softening.

One of the reasons I like TJX a little better is that it has exposure to nine countries beyond the US. The company has more than 4,700 stores; investors will be familiar with its brands: Winners, HomeSense, and Marshalls. Also, there are a large group of e-commerce sites related to the brands.

Financially, the company is very strong. Sales last year were $48.5 billion (figures in US dollars), which was up $7 billion from 2019. It also delivered the highest sales and net income in the company's history.

TJX generated $3.1 billion in operating cash flow and ended the year with $6.2 billion worth of cash on its balance sheet, so it’s in a very comfortable position regardless of what the economy does.

Ross Stores is a US-based business only and has 1,648 locations in 40 states. The company also has another brand called DD's Discount, which has 300 locations in 21 states. Last year its revenues were $18.9 billion.

Recent earnings for Ross were very encouraging, topping analysts’ forecasts. The company is on track to buy back a total of $950 million worth of common stock during fiscal 2022 under its two-year $1.9 billion repurchase program that extends through fiscal 2023.

If you want exposure to the Christmas selling season, either of these companies would work and they have been good performers over time as well. Both are shareholder friendly, paying a small dividend and buying back stock.

On the negative side, both stocks have traded up and are not inexpensive at the current level. Both trade at a p/e of about 28. I would take a small position in one or the other and buy more on any pullback.

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