Hedge Funds Are Buying Dollar Tree, Inc. (DLTR)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Dollar Tree, Inc. (NASDAQ:DLTR).

Dollar Tree, Inc. (NASDAQ:DLTR) was in 42 hedge funds’ portfolios at the end of June. The all time high for this statistic is 65. DLTR has experienced an increase in enthusiasm from smart money of late. There were 41 hedge funds in our database with DLTR holdings at the end of March. Our calculations also showed that DLTR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the eyes of most traders, hedge funds are seen as unimportant, old financial tools of yesteryear. While there are more than 8000 funds with their doors open at present, We hone in on the elite of this group, about 850 funds. These investment experts command most of the smart money’s total asset base, and by keeping track of their unrivaled picks, Insider Monkey has identified numerous investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Glenn Greenberg

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to analyze the key hedge fund action encompassing Dollar Tree, Inc. (NASDAQ:DLTR).

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

At Q2’s end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DLTR over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DLTR A Good Stock To Buy?

The largest stake in Dollar Tree, Inc. (NASDAQ:DLTR) was held by Akre Capital Management, which reported holding $357 million worth of stock at the end of June. It was followed by Rivulet Capital with a $226.2 million position. Other investors bullish on the company included Arrowstreet Capital, Brave Warrior Capital, and East Side Capital (RR Partners). In terms of the portfolio weights assigned to each position Rivulet Capital allocated the biggest weight to Dollar Tree, Inc. (NASDAQ:DLTR), around 12.81% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, designating 9.1 percent of its 13F equity portfolio to DLTR.

With a general bullishness amongst the heavyweights, some big names have jumped into Dollar Tree, Inc. (NASDAQ:DLTR) headfirst. East Side Capital (RR Partners), managed by Steven Richman, established the most valuable position in Dollar Tree, Inc. (NASDAQ:DLTR). East Side Capital (RR Partners) had $84.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $18.2 million investment in the stock during the quarter. The following funds were also among the new DLTR investors: Gregg Moskowitz’s Interval Partners, Anthony Joseph Vaccarino’s North Fourth Asset Management, and Joseph Samuels’s Islet Management.

Let’s also examine hedge fund activity in other stocks similar to Dollar Tree, Inc. (NASDAQ:DLTR). These stocks are NovoCure Limited (NASDAQ:NVCR), W.W. Grainger, Inc. (NYSE:GWW), CNH Industrial NV (NYSE:CNHI), Trip.com Group Limited (NASDAQ:TCOM), MongoDB, Inc. (NASDAQ:MDB), CGI Inc. (NYSE:GIB), and The Clorox Company (NYSE:CLX). This group of stocks’ market caps resemble DLTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVCR 25 500806 3
GWW 29 221218 -1
CNHI 24 680613 1
TCOM 41 1997956 6
MDB 44 1693975 -2
GIB 14 252456 -1
CLX 37 980009 -1
Average 30.6 903862 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $904 million. That figure was $1380 million in DLTR’s case. MongoDB, Inc. (NASDAQ:MDB) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Dollar Tree, Inc. (NASDAQ:DLTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DLTR is 72.1. 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 22.9% in 2021 through October 1st and beat the market again by 5.6 percentage points. Unfortunately DLTR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DLTR were disappointed as the stock returned -1.5% since the end of June (through 10/1) 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.

Follow Dollar Tree Inc. (NASDAQ:DLTR)

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