Broyhill Asset Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. For the full year ending December 31, 2021, Broyhill generated low-to-mid-twenties returns on equities. Overall performance varied depending on individual account asset allocations, legacy positions, and capital flows. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Broyhill Asset Management, in its Q4 2021 investor letter, mentioned Dollar Tree, Inc. (NASDAQ: DLTR) and discussed its stance on the firm. Dollar Tree, Inc. is a Chesapeake, Virginia-based discount store company with a $32.1 billion market capitalization. DLTR delivered a 32.38% return since the beginning of the year, while its 12-month returns are up by 32.38%. The stock closed at $142.84 per share on February 19, 2022.
Here is what Broyhill Asset Management has to say about Dollar Tree, Inc. in its Q4 2021 investor letter:
“Our short-term trade in Avis was unusual for our long-term investment approach, but occasionally the market figures out mispricing sooner than later, and when it does, we are more than happy to take our chips off the table and wait for the next opportunity.
Our investment in Dollar Tree, which we’ve held for nearly five years, is more representative of our typical time horizon and investment philosophy, which seeks mispriced assets with minimal downside and the potential to double our capital over 3-5 years. Those doubles rarely play out as quickly as the surge in rental car pricing. Just last quarter, we highlighted Dollar Tree as a top detractor
after the company issued weak guidance due to rising cost pressure. Investors were rightly frustrated after years of management missteps and false starts following the acquisition of Family Dollar.At some point, we hoped, sentiment would be just right. While the timing of that scenario is impossible to predict, we increased our position in September as shares traded back towards our original 2017 purchase price. At month end, the board increased Dollar Tree’s existing share repurchase authorization to $2.5 billion, representing~ 13% of the company’s then market capitalization, initiating a dramatic shift in investor sentiment. Management also announced that it was on track to have 500 Dollar Tree Plus stores by fiscal year-end, with another 1,500 stores planned for FY22 and at least 5,000 expected by FY24. In addition, management highlighted the success of the company’s Combo Stores (which include both Dollar Tree and Family Dollar banners), noting sales and gross profit increases greater than 20% and 30%, respectively. While there are only 105 existing Combo Stores, management expects to add 400 more in FY22, with the potential for up to 3,000 over the next several years.
In our experience, big gains often come after years of meager performance. Patience truly is a virtue in this business, as successful investing requires confidence in your research and analysis, even when the market disagrees with you for what may seem like an eternity. In this case, after holding Dollar Tree for half a decade, shares nearly doubled, gaining 77% in the two months following that management announcement. Despite recent gains, we continue to hold our investment as consensus estimates have yet to catch up to the likely inflection in earnings power from higher price points. And with the guidance of Richard Dreiling, the former Dollar General CEO, credited with turning around DG in the early part of the last decade, we think the odds of successful execution have increased materially.”
Photo by Karolina Grabowska from Pexels
Our calculations show that Dollar Tree, Inc. (NASDAQ: DLTR) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. DLTR was in 44 hedge fund portfolios at the end of the third quarter of 2021, compared to 28 funds in the previous quarter. Dollar Tree, Inc. (NASDAQ: DLTR) delivered a 5.84% return in the past 3 months.
In January 2022, we also shared another hedge fund’s views on DLTR in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
