10 Best Falling Stocks To Buy According to Hedge Funds

3. Dollar General Corporation (NYSE:DG)

52 Week Range: $77.96 – $168.07

Current Share Price: $80.41

Number of Hedge Fund Holders: 42 

Dollar General Corporation (NYSE:DG) is a discount retailer that sells a wide range of products at lower prices. They deal in retail selling of consumable products, seasonal items, home products, apparel, and much more. They offer products of well-known brands at affordable prices across the United States.

The company reported its second-quarter results for fiscal 2024 on August 29, indicating a mixed performance with some growth and market challenges. While Dollar General Corporation (NYSE:DG) reported net income growth of 4.2% year-over-year to $10.2 billion during the quarter however, it fell short of analysts’ expectations by $160.52 million.

Management noted that its core customer base originates from households with earnings less than $35,000 annually and the recent inflationary months have left its customer base financially strained. Regardless of the challenge, the company was able to grow its same-store sales by 0.5% during the quarter, which was driven by a 1% growth in consumer traffic and offset by a 0.5% decline in average transaction amount.

As a result of a softer market, the company has revised its guidance for Fiscal year 2024. It now expects net sales growth in the range of 4.7% to 5.3%, downgraded from the previous expectation of 6% to 6.7%.

The stock was held by 42 hedge funds in Q2 2024, as per Insider Monkey’s database, and is one of the best-falling stocks to buy according to hedge funds.

Heartland Mid Cap Value Fund stated the following regarding Dollar General Corporation (NYSE:DG) in its Q3 2024 investor letter:

“Consumer Staples. The convenience store operator Dollar General Corporation (NYSE:DG) was our worst performer during the quarter. The retailer, with more than 19,000 stores, 80% of which are in rural towns with populations of less than 20,000, recently slashed its 2024 earnings guidance, sparking a late-summer sell-off.

Same-store comparable sales and margin guidance were cut meaningfully, implying a significant slowdown in the second half of the year. While some of the troubles may be due to the financial challenges of its core customers, with average incomes of just $35,000, Dollar General is also losing market share because of Walmart’s initiative to reduce entry-level pricing. Management acknowledged a need to invest in promotions to stimulate demand, but they refute concerns that DG needs to invest more in store-level labor.

We exited the position and harvested the tax losses, but we continue to monitor the company’s fundamentals. We’re looking for comparable sales to stabilize driven by promotional activity, a boost in labor investments, and management to downsize store expansion plans to improve free cash flow generation and accelerate deleveraging efforts.”