We recently published a list of Jim Cramer’s latest portfolio: 10 stocks to buy and sell. Since Dollar Tree Inc (NASDAQ:DLTR) is ranked 7th on the list, it deserves a closer look.
Jim Cramer again discussed the recent market sell-off on a new show, saying the notion that the general collapse was due to fear of a “hard landing” was “completely wrong.” Cramer said it had only to do with the Japanese stock market and the yen and “nothing more.”
“A number of asset managers have taken advantage of the opportunity to borrow against very low-interest Japanese bonds and thus have relatively free money to invest in stocks around the world, including here (in the U.S.),” Cramer said.
Jim Cramer said small-cap stocks are “trying to come back.” However, he pointed out a “problem” with the small-cap rally. He said no one was actually buying individual small-cap stocks, but was instead stocking up on ETFs. According to Cramer, investors “walked away” when the broader market faltered.
For this article, we looked at the latest shows about Cramer that aired recently on CNBC and picked 10 stocks he talks about. For each company, we mentioned the number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
Dollar Tree Inc (NASDAQ:DLTR)
Number of hedge fund investors: 39
Jim Cramer is pessimistic about DLTR. In a recent show, he said the company’s business model isn’t working and customers would rather go to Walmart or Costco.
Dollar Tree Inc (NASDAQ:DLTR) shares have lost about 33% of their value so far this year. Inflation is high, so shouldn’t the company benefit from consumers looking for affordable items? Analysts believe Americans are avoiding spending money on items sold at stores like Dollar Tree Inc (NASDAQ:DLTR) because they are prioritizing essential items like groceries. Management failures are also one of the reasons Dollar Tree stores are struggling. According to Consumer Affairs, customers have complained about staff shortages at several Dollar Tree stores.
Dollar Tree Inc (NASDAQ:DLTR) is also suffering from competition from Chinese discount brands. In June, the company announced that it plans to sell the Family Dollar business.
Citigroup analyst Paul Lejuez downgraded Dollar Tree Inc (NASDAQ:DLTR) from Buy to Neutral on the 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 stores at Dollar Tree Inc (NASDAQ:DLTR) to expand the customer base and increase sales. However, the introduction of higher prices fell short of expectations: 25% of new multi-price stores fell short of expectations.
Lejuez also noted that the decision to consider strategic alternatives for Family Dollar suggests deeper structural problems than previously thought.
Piper Sandler recently downgraded the stock from Overweight to Neutral. The downgrade reflects concerns about the retailer’s vulnerability regardless of the outcome of the upcoming presidential election. A Trump victory could revive tariff risks that previously affected about 10% of Dollar Tree Inc’s (NASDAQ:DLTR) goods, including essential items such as household products and electronics. While the threat of a 60% tariff is serious, such rates are unlikely. A Biden victory, on the other hand, could lead to new overtime regulations.
Madison Investors Fund stated the following about Dollar Tree, Inc. (NASDAQ:DLTR) in its Investor letter Q2 2024:
“Dollar Tree, Inc.. (NASDAQ:DLTR) fell short of expectations due to a variety of concerns: weakness in the low-end consumer segment, pricing actions by competitors, and disappointing sales at its core Dollar Tree business. In addition, the important news that management has undertaken a strategic review of the struggling Family Dollar business was met with skepticism by investors. Despite these concerns, we are encouraged by the long-term prospects of the multi-price initiatives at Dollar Tree and fully support management’s efforts to increase 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 recognize Dollar Tree Inc (NASDAQ:DLTR)’s potential, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than DLTR but worth less than 5 times its earnings, read our report on the cheapest AI stock.
READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these stocks.
Disclosure: None. This article was originally published on Insider Monkey.
