We recently published a list of Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. Since Dollar Tree Inc (NASDAQ:DLTR) 7th on the list, it deserves a deeper look.
Jim Cramer in a new program discussed the latest market selloff again, saying the notion the broader meltdown was because of “hard landing” fears is “totally false.” Cramer said that it was all related to the Japanese stock market and Yen, and “nothing more.”
“A bunch of money managers took advantage of how you can borrow against Japanese bonds which had a very low interest rate and then have relatively free money which you can put to work in stocks all around the globe, including here (the US),” Cramer said.
Jim Cramer said that small-cap stocks are “trying to come” back. However, he pointed to an “issue” with the small-cap rally. He said that no one actually bought individual small-cap stocks and instead loaded up on ETFs. Investors, according to Cramer, “walked away” when the broader market wavered.
For this article we watched the latest programs on Cramer recently aired on CNBC and picked 10 stocks he’s talking about. With each company we have mentioned the number of hedge fund investors. 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 Investors: 39
Jim Cramer is bearish on DLTR. He said in a latest program that the company’s business model is not working and customers would rather go to Walmart or Costco.
Dollar Tree Inc (NASDAQ:DLTR) shares have lost about 33% in value so far this year. Inflation is high, so isn’t the company supposed to benefit as consumers search for affordable items? Analysts believe Americans are avoiding spending on items that are sold in stores like Dollar Tree Inc (NASDAQ:DLTR) because they are prioritizing essential items like groceries. Management missteps are also part of the reason why Dollar Tree stores are struggling. According to Consumer Affairs, customers have complained about staffing shortages at several Dollar Tree stores.
Dollar Tree Inc (NASDAQ:DLTR) is also getting hammered amid competition from low-cost Chinese brands. In June the company said it’s planning to sell Family Dollar business.
Citigroup’s analyst Paul Lejuez downgraded Dollar Tree Inc (NASDAQ:DLTR) from Buy to Neutral on this news, citing increased uncertainty and a more balanced risk/reward scenario.
Lejuez’s earlier bullish stance was based on the appointment of CEO Rick Dreiling, a “proven operator,” and the introduction of multi-price points at Dollar Tree Inc (NASDAQ:DLTR) to broaden its customer base and boost sales. However, the rollout of higher price points has fallen short, with 25% of the new multi-price stores underperforming expectations.
Lejuez also noted that the decision to consider strategic alternatives for Family Dollar suggests deeper structural issues than previously thought.
Piper Sandler recently downgraded the stock from Overweight to Neutral. The downgrade reflects concerns about the retailer’s vulnerabilities, regardless of the outcome of the upcoming Presidential election. A Trump victory could reintroduce tariff risks that previously impacted about 10% of Dollar Tree Inc (NASDAQ:DLTR) merchandise, including key items like household products and electronics. While the threat of a 60% tariff is deemed serious, such rates are unlikely. A Biden victory, on the other hand, could lead to new overtime regulations.
Madison Investors Fund stated the following regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its Q2 2024 investor letter:
“Dollar Tree, Inc. (NASDAQ:DLTR) underperformed following a plethora of concerns: weakness surrounding the low-end consumer, pricing actions by peers, and disappointing sales at the core Dollar Tree banner. In addition, the significant news that management has placed the struggling Family Dollar banner under strategic review was received skeptically by investors. Despite these concerns, we are encouraged by the long-term prospects of the multi-price initiatives at the Dollar Tree banner and are entirely supportive of management’s effort to enhance value by evaluating alternatives for Family Dollar. We also see a comfortable margin of safety in the shares at the current price.”
Overall, Dollar Tree Inc (NASDAQ:DLTR) ranks 7th on Insider Monkey’s list titled Jim Cramer’s Latest Portfolio: 10 Stocks to Buy and Sell. While we acknowledge the potential of Dollar Tree Inc (NASDAQ:DLTR), 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.
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Disclosure: None. This article is originally published at Insider Monkey.
