We recently published a list of the 10 Worst Performing Stocks in S&P 500 in 2024. In this article, we are going to take a look at where Dollar Tree, Inc. (NASDAQ:DLTR) stands against other worst performing S&P 500 stocks in 2024.
Since 2023, the market has experienced extended winning streaks, reflecting the economy’s resilience. The most recent rally stretched six consecutive weeks but finally came to an end between October 21 and 25, marking the first week in six to close with a loss.
Nevertheless, the tech sector still closed with small gains as it was led by Tesla after its strong earnings. Despite that, now some experts in the market are trying to broaden their investments as they see uncertainty in the coming months, mainly due to the election and geopolitical reasons.
READ ALSO: 10 Best-Performing S&P 500 Stocks in the Last 3 Years and 10 Worst Performing Dow Stocks Year-to-Date.
A New Investment Approach Favoring Value Over Tech in Uncertain Times
James Cakmak, Chief Investment Officer at Clockwise Capital, detailed his recent shift from the tech-heavy Mag7 stocks into more diverse, value-focused sectors. Initially long on tech, Cakmak’s strategy changed due to heightened risks related to the election, geopolitical tensions, and economic cycles. While tech had seen significant growth, he felt it was essential to seek other opportunities for “alpha” as the market evolved.
Cakmak explained that Clockwise Capital has moved funds into undervalued sectors, such as automotive and metals, as well as smaller, less mainstream software companies.
Addressing inflation, Cakmak stressed the importance of keeping metals as a hedge. With inflation still showing signs of persistence and the Fed adjusting its rate cut expectations, he sees value in maintaining assets that traditionally perform well during inflationary periods, including gold.
Finally, he highlighted his commitment to semiconductors as a long-term investment theme, acknowledging their volatility but affirming their relevance in driving automation and productivity.
If we talk about other opportunities in the market, Goldman Sachs is bullish on undervalued quality growth stocks and cyclical value stocks as discussed by Christian Mueller-Glissmann from Goldman in a CNBC interview. We talked about it in our article: 12 Most Profitable Growth Stocks To Invest In. Here is an excerpt from it:
“Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes.”
Our Methodology
For this article, we checked the performance of the S&P 500 stocks and picked out the 10 stocks with the highest share price decline, as of October 24. The stocks are listed in descending order of their share price performance. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 38
Year-to-Date Share Price Performance: -53.03%
Dollar Tree, Inc. (NASDAQ:DLTR) operates over 15,000 discount stores under the Dollar Tree, Family Dollar, and Dollar Tree Canada brands. Dollar Tree offers products ranging from $1.25 to $5, while Family Dollar targets lower-income customers with items priced between $1 and $10. The company sells a range of consumables, seasonal items, and general merchandise, including apparel and electronics.
As mentioned by Madison Investments second-quarter 2024 investor letter, Dollar Tree (NASDAQ:DLTR) struggled recently due to several issues, including challenges in the low-income consumer segment, competitive pricing strategies from other retailers, and weak sales at the Dollar Tree brand. Investors reacted cautiously to management’s decision to review the underperforming Family Dollar brand.
Madison added that despite all of it, there is optimism about the long-term potential of the multi-price initiatives at Dollar Tree, and support for management’s efforts to explore options for Family Dollar.
BoFA analyst Robert Ohmes is more bearish on the stock as he said that while the company is promoting value through its multi-price assortment and some successful store transformations aimed at increasing basket size, concerns remain about potential gross margin declines. The multi-price strategy currently contributes only a small share of total sales, and its broader benefits have yet to materialize.
The company is now looking to address its problems as it conducted a comprehensive assessment of its store portfolio to pinpoint locations for closure, relocation, or rebranding, considering market conditions and individual store performance.
Madison Mid Cap Fund stated the following regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its Q3 2024 investor letter:
“The bottom five detractors for the quarter were Dollar Tree, Inc. (NASDAQ:DLTR), MKS Instruments, PACCAR, Copart, and Amphenol. Dollar Tree underperformed following disappointing sales at the core Dollar Tree banner and reduced full year earnings guidance. The company, as well as its closest peers, is facing headwinds from a weak low-end consumer, less ‘trade-down’ benefit from middle-income consumers, and a tough competitive environment. Despite these headwinds, we are encouraged by the long-term prospects of the multi-price initiatives at the Dollar Tree banner, with the latest iteration of updated stores showing a strong up-lift in sales. As management more aggressively rolls out these updates, the impact to the company will be more meaningful, and, we believe, result in much higher earnings power.
The headwinds outlined above impacting Dollar Tree’s business has resulted in the stock trading at depressed levels. Given our confidence in the core strength of the Dollar Tree franchise and its potential long-term earnings power, we added to our holding.”
Overall, DLTR ranks 4th on our list of worst performing stocks in the S&P 500. While we acknowledge the potential of DLTR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
