Coho Partners, an investment advisory firm, released its second-quarter 2023 investor letter. A copy of the same can be downloaded here. So far, 2023 was one of the most challenging periods in the firm’s history. The fund had a fractional loss through the first six months of 2023 which compared poorly against the S&P 500 Index’s return of just under 17% and the Russell 1000 Value Index’s return of just over 5%. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Coho Partners Relative Value Equity Fund highlighted stocks like Dollar General Corporation (NYSE:DG) in the second quarter 2023 investor letter. Headquartered in Goodlettsville, Tennessee, Dollar General Corporation (NYSE:DG) is a discount retailer. On July 20, 2023, Dollar General Corporation (NYSE:DG) stock closed at $168.79 per share. One-month return of Dollar General Corporation (NYSE:DG) was -1.38%, and its shares lost 31.89% of their value over the last 52 weeks. Dollar General Corporation (NYSE:DG) has a market capitalization of $37.023 billion.
Coho Partners Relative Value Equity Fund made the following comment about Dollar General Corporation (NYSE:DG) in its second quarter 2023 investor letter:
“Dollar General Corporation (NYSE:DG) has experienced an unusual period of execution issues exacerbated by external pressures on its core consumer. It began as a problem of riches as the success in meeting the needs of existing and new customers throughout the pandemic started to catch up with the company toward the end of 2022. At that point, supply chain wobbles suggested the distribution infrastructure couldn’t keep up with the growth. Given DG’s ability to quickly course correct, we believed these issues would be resolved within a few quarters. What we failed to appreciate was the cascade effect the distribution center bottlenecks would have on the company’s expansive store base. Inefficiencies in the distribution centers led to labor inefficiencies in the stores and out-of-stocks on the shelves. This, in turn, resulted in decreased customer satisfaction, declining traffic trends, and the need to invest in price to win customers back. This all took place in the context of a core customer base that was being impacted by the roll off of government stimulus, lower tax receipts, and a cut to SNAP (supplemental nutritional assistance program) benefits.
We established our initial DG position in 2015 when the stock was being hit by an uncannily similar confluence of events. Back then the company’s customer base was facing some of the same macro pressures. There were operational miscues that raised concerns about management competence, and there were fears of a competitive price war. We used that as an opportunity to initiate a position in what we believed was a low-risk, high-return business model that had a meaningful growth trajectory while exhibiting compelling demand defensive characteristics. From that time up until the guidance cut in F3Q22, DG was one of the largest contributors to overall portfolio performance. We acknowledge that it will take time to start up new distribution centers and stabilize traffic trends, but at current prices we see an opportunity for future returns similar to what we saw back in 2015. As such, we added to our DG position in June.”
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Dollar General Corporation (NYSE:DG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 53 hedge fund portfolios held Dollar General Corporation (NYSE:DG) at the end of first quarter 2023 which was 59 in the previous quarter.
We discussed Dollar General Corporation (NYSE:DG) in another article and shared the list of best retail dividend stocks to buy. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
