3. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 51
Dollar General Corporation (NYSE:DG) is a Goodlettsville, Tennessee-based discount retailer with over 18,000 stores across 47 states in the US. The company has established its stores in sub-urban and small towns where big box retailers like Walmart, Inc. (NYSE:WMT) are not present.
In a research note issued on September 16, Matthew Boss at JPMorgan increased the target price for Dollar General Corporation (NYSE:DG) from $287 to $294 and reiterated an Overweight rating on the stock. The target price reflects a potential upside of over 20% from the closing price as of November 8. Experts believe that Dollar General Corporation (NYSE:DG) is one of the few retailers that are in a strong position to experience top-line growth and margin expansion in the future as consumers shift focus from discretionary purchases to consumables owning to the macroeconomic environment. This makes the company one of the best long-term stocks to own now.
Analysts are bullish on Dollar General Corporation (NYSE:DG) in the long term, as the firm has shown a strong acceleration in sales over the last few years. The company observed an increase in revenue to $34.22 billion in 2021 from $23.47 billion in 2017. In addition, effective cost control is likely to help Dollar General Corporation (NYSE:DG) sustain its profitability margins.
Here’s what LRT Capital Management said about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
