Here is What Hedge Funds Think About Dollar General Corp. (DG)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Dollar General Corp. (NYSE:DG).

Dollar General Corp. (NYSE:DG) has seen an increase in activity from the world’s largest hedge funds in recent months. Dollar General Corp. (NYSE:DG) was in 46 hedge funds’ portfolios at the end of September. The all time high for this statistic is 67. There were 45 hedge funds in our database with DG positions at the end of the second quarter. Our calculations also showed that DG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to analyze the new hedge fund action surrounding Dollar General Corp. (NYSE:DG).

Do Hedge Funds Think DG Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the second quarter of 2021. By comparison, 56 hedge funds held shares or bullish call options in DG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, holds the biggest position in Dollar General Corp. (NYSE:DG). BlueSpruce Investments has a $655.2 million position in the stock, comprising 11.4% of its 13F portfolio. The second most bullish fund manager is Orbis Investment Management, managed by William B. Gray, which holds a $271.1 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Panayotis Takis Sparaggis’s Alkeon Capital Management and Ray Dalio’s Bridgewater Associates. In terms of the portfolio weights assigned to each position BlueSpruce Investments allocated the biggest weight to Dollar General Corp. (NYSE:DG), around 11.41% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, setting aside 7.67 percent of its 13F equity portfolio to DG.

Consequently, key hedge funds were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, established the most valuable position in Dollar General Corp. (NYSE:DG). Senator Investment Group had $74.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $13 million position during the quarter. The other funds with new positions in the stock are Roberto Mignone’s Bridger Management, Tom Gayner’s Markel Gayner Asset Management, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Dollar General Corp. (NYSE:DG) but similarly valued. We will take a look at Banco Santander (Brasil) SA (NYSE:BSBR), Johnson Controls International plc (NYSE:JCI), Keurig Dr Pepper Inc. (NASDAQ:KDP), Coupang, Inc. (NYSE:CPNG), Wipro Limited (NYSE:WIT), Marriott International Inc (NYSE:MAR), and Twitter Inc (NYSE:TWTR). This group of stocks’ market valuations are similar to DG’s market valuation.

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As you can see these stocks had an average of 39.9 hedge funds with bullish positions and the average amount invested in these stocks was $3207 million. That figure was $1906 million in DG’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 8 bullish hedge fund positions. Dollar General Corp. (NYSE:DG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DG is 48.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately DG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DG were disappointed as the stock returned 4.5% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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