The Companies that are Thriving

Walmart is a good buy and McDonald's is cheap and easy, so none of this is too much of a surprise.

“A lot of other companies, when there is some sort of economic downturn, they go into triage mode where they are trying to figure out their costs,” Kotick said. “We do that all the time.”

Kotick acted quickly during the recession, merging his company last year with Blizzard, the game division of France’s Vivendi SA. Activision got “World of Warcraft,” an online role-playing game with more than 11 million subscribers paying $14.99 a month. That helped Kotick boost market share in North America and Europe by 2.8 percentage points to 12.7 percent even as industry sales fell 14 percent.

Activision offers one example of how companies well- positioned for the worst economic slump since the 1930s have gained a competitive advantage.

Wal-Mart Stores Inc. expanded electronics offerings after Circuit City Stores Inc. liquidated, McDonald’s Corp. rolled out low-priced lattes and casino owner Penn National Gaming Inc. is looking to expand into Las Vegas. J.M. Smucker Co. added Folgers, the best-selling ground coffee in the U.S., to its market-leading jelly, jam and preserve brand; Ford Motor Co. boosted output while U.S. rivals filed for bankruptcy; and Verizon Communications Inc. bought Alltel Corp.

Beating the S&P

Six of those seven companies have outperformed the Standard & Poor’s 500 Index since the recession began in December 2007, while Penn National, the only laggard, has outpaced the S&P since the benchmark’s March 9 low.

The lesson, capitalism works even in the toughest times. And this is being done through investment, savvy marketing, and most importantly providing products consumers want:

U.S. restaurant-industry traffic fell 2.6 percent for the three months ended May 2009, according to market researcher NPD Group, the steepest drop since 1981. Sales at McDonald’s U.S. stores open at least 13 months gained 3.5 percent in the second quarter, the company said.

Breakfast Boost

While it’s too early to say whether the drinks strategy will meet McDonald’s goals, the coffee is “bringing people into McDonald’s more often and they’re spending more on breakfast and the rest of the menu,” said Richard Jeremiah, a restaurant analyst with marketing researcher IBISWorld Inc. in Los Angeles. “The key thing at the moment is getting that traffic.”

As for the others, Walmart invested in laptops and electronics following the demise of circuit city. Ford expanded production as Chrysler and GM went into bankruptcy, and Smuckers simply took advantage of the fact that people were more likely to eat at home. In a perfect world the Democrats would let all companies find their own solutions, instead of the crony capitalism that so defines their economic policy.