Update
By Julie Schlosser

(FORTUNE Magazine) – What we said

In a story titled "Don't Discount These Retailers" in our Oct. 14, 2002, issue (see fortune.com), we argued that despite the slump in retail sales, there were some bargains to be found among the lesser-known but fast-growing discount chains. We singled out the stocks of three companies--99 Cents Only Stores, Big Lots, and Rent-A-Center--for their growth prospects and market position.

What happened

Our discount retailers have proved to be pretty good deals. Nearly seven months after we settled on the three stocks, they are up an average of 9%. While that's below the S&P 500's 12% gain for the same period, two of the picks have outperformed the broader market. Thanks to the tight spending climate, plenty of dollar-only spending has helped drive 99 Cents Only Stores (NDN, $30) up 36%, making it our top performer. Those same cash-strapped consumers have continued the strong trend of rent-to-own appliance shopping, and the allure of paying more later has helped Rent-A-Center (RCII, $60) in the here and now. Its stock has climbed 15%. We should have waited for our final pick, Big Lots (BLI, $13), to get marked down. It increased revenue 13% and boosted cash flow in 2002, but it appears investors were turned off by lukewarm same-store sales. Shares are down 25% since last fall. --Julie Schlosser