In this article, we will look at the 10 Best Discount Store Stocks to Invest In.
Is Inflation and Slow Economic Growth on the Horizon for the US?
The market is abuzz with concerns about the economic growth of the US, with inflation-related worries infesting consumer confidence. These factors are gaining force as the tariff deadlines imposed by President Trump on Canada and Mexico steadily approach after a delay in February. Investors are also skeptical about the labor market impacts of the initiatives taken by Elon Musk’s Department of Government Efficiency (DOGE).
The Conference Board reported that the consumer confidence index fell 7 points to 98.3, experiencing its largest fall since August 2021 and below the Dow Jones forecast of 102.3. In addition, The Expectations Index dropped to a 72.9 reading, reflecting a decrease of 9.3 points. The measure has tumbled below the level consistent with recession for the first time since June 2024.
These trends show that consumers are becoming increasingly pessimistic about the country’s economic outlook, and this pessimism reached new heights in February due to skepticism surrounding rising inflation and a slowing economy, according to the Conference Board. CNBC reported that Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said the following about the situation:
“The present situation index improved, but consumers expect dark skies ahead. Change can be scary, so it’s not surprising that confidence is falling.”
Joseph Trevisani, senior analyst at FXStreet in New York, expressed similar sentiments, as reported by CNBC:
“There’s going to be a lot of back and forth on Trump’s initiatives, and certainly markets in general long term, don’t like tariffs. There’s definitely nervousness out there because some of these things could go the wrong way. Certainly, inflation hasn’t shown any sign of further retreat.”
We discussed the major drop in consumer sentiment in a recently published article on the 10 Cheap Food Stocks to Buy According to Hedge Funds. Here is an excerpt from the article:
“Economists and experts opine that the situation is unpredictable and worrisome. Trump’s tariffs may ignite another bubbling of inflation in a scenario where the Federal Reserve is weighing the odds of whether to slash interest rates further or hold steady as experts and policymakers chalk out the effects of the President’s aggressive trade and fiscal policies, as reported by CNBC.
Consumers are reflecting the worries of economists and experts, as the 12-month inflation expectations rose to 6%, up from 5.2% in the last month and considerably higher than the Fed’s steady goal of 2%.
Treasury Secretary Scott Bessent rang caution bells regarding “sticky” inflation and the potential for slow growth. He attributed the cause to former President Biden’s administration, saying that he fostered an economy too dependent on government spending. He said the government’s plan now is to develop a more diverse economy through deregulation, tax cuts, and tariffs”.
READ ALSO: 10 Cheap Food Stocks to Buy According to Hedge Funds and 12 Best Grocery Store Stocks to Buy Now.
What Are American Consumers Feeling?
CNBC reported that the University of Michigan consumer survey for February reflected similar consumer sentiments. Respondents expect the inflation rate to be around 4.3% a year from now, reflecting a 1 percentage point jump from January and the highest level since November 2023. The news channel reported that Robert Frick, corporate economist at Navy Credit Union, said the following about the situation:
“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes. Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”
Since potentially higher prices in the future are a major concern for millions of Americans, consumers may increasingly direct their attention towards discount stores and value deals to make their way through the scenario. With these trends in view, let’s look at the 10 best discount store stocks to invest in.
A busy grocery store aisle stocked with the company’s weight management products.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 15 discount store stocks. We then selected the top 10 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Discount Store Stocks to Invest In
10. PriceSmart, Inc. (NASDAQ:PSMT)
Number of Hedge Fund Holders: 22
PriceSmart Inc. (NASDAQ:PSMT) owns and operates American-style membership warehouse clubs in South America, the Caribbean, and Central America. It is often called the Costco of South America and operates through approximately 54 warehouse clubs in 12 countries and one US territory. It offers its members a wide array of services and merchandise, including categories such as consumables, health services, fresh food, hardline, and bakery.
PriceSmart Inc. (NASDAQ:PSMT) is running on positive financials. It reported net merchandise sales of $1.22 billion for fiscal Q1 2025, while total revenue reached $1.26 billion. Net merchandise sales increased by 7.8% or 8.2% in constant currency, while comparable net merchandise sales rose by 5.7% or 6.1% in constant currency.
The company’s food category grew approximately 1.8% in fiscal Q1 2025 compared to last year’s period. Its non-foods category also grew by approximately 10.2%, and food services and bakery categories grew by around 7.5%, reflecting PriceSmart Inc.’s (NASDAQ:PSMT) solid operations. The company takes the tenth spot on our list of the best discount store stocks to buy now.
9. Ollies Bargain Outlet Holdings (NASDAQ:OLLI)
Number of Hedge Fund Holders: 34
Ollies Bargain Outlet Holdings (NASDAQ:OLLI) operates as a value retailer of brand-name closeout merchandise and excess inventory. Principally, the company buys overstocked, overproduced, and closeout merchandise from wholesalers, manufacturers, brokers, distributors, and other retailers to sell to its customers. It operates in a warehouse format, featuring various categories ranging from hardware, clothing, and sporting goods to health and beauty, food, electronics, and much more.
With over 550 stores in 31 states, Ollies Bargain Outlet Holdings (NASDAQ:OLLI) is the largest buyer of closeouts and excess inventory, which gives it a competitive market advantage. It has opportunistically acquired various real estate sites, bolstering its new store pipeline and competitive positioning. These opportunities include the former 99 Cents Only Stores in Texas, which the company acquired out of bankruptcy in May 2024.
Ollies Bargain Outlet Holdings (NASDAQ:OLLI) also acquired closing Big Lots stores as another real estate opportunity. It took over 17 store locations and recently won the bid for an additional 7 stores. The company is prioritizing the opening of these acquired stores. It boasts a strong new store pipeline, and its record new store openings set for 2025 cast a positive light on the company.
Wasatch Small Cap Growth Strategy made the following comment about Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) in its Q3 2023 investor letter:
“The third quarter’s top contributor to strategy performance was Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI). The company’s stores offer a constantly changing selection of close-out items and other brand-name merchandise at deeply discounted prices. A steady flow of inventory acquired from distressed retailers has attracted customers to Ollie’s and boosted sales. In the company’s most recent quarter, net sales rose a better-than-expected 13.7% year over year, driven by an increase of 7.9% in comparable-store sales and the addition of six new locations. With margins and earnings also exceeding estimates, management upped its guidance for fiscal year 2023. Because the discounts at Ollie’s help consumers stretch their dollars, we think the company is better situated than most other retailers in the current inflationary environment.”