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Hedge Funds Have Never Been This Bullish On Dollar General Corp. (DG)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Dollar General Corp. (NYSE:DG) based on that data.

Is Dollar General Corp. (NYSE:DG) the right pick for your portfolio? Investors who are in the know are getting more bullish. The number of long hedge fund positions rose by 10 lately. Our calculations also showed that DG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several gauges stock market investors employ to size up their holdings. Two of the most underrated gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the market by a superb amount (see the details here).

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the latest hedge fund action regarding Dollar General Corp. (NYSE:DG).

Hedge fund activity in Dollar General Corp. (NYSE:DG)

At the end of the first quarter, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DG over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Dollar General Corp. (NYSE:DG), which was worth $215.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $177.9 million worth of shares. Renaissance Technologies, Holocene Advisors, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to Dollar General Corp. (NYSE:DG), around 10.96% of its 13F portfolio. Emerson Point Capital is also relatively very bullish on the stock, setting aside 7.51 percent of its 13F equity portfolio to DG.

As one would reasonably expect, key money managers were breaking ground themselves. Suvretta Capital Management, managed by Aaron Cowen, assembled the biggest position in Dollar General Corp. (NYSE:DG). Suvretta Capital Management had $77.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $69.5 million position during the quarter. The following funds were also among the new DG investors: Louis Bacon’s Moore Global Investments, Panayotis Takis Sparaggis’s Alkeon Capital Management, and Steven Boyd’s Armistice Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Dollar General Corp. (NYSE:DG) but similarly valued. These stocks are Ferrari N.V. (NYSE:RACE), Norfolk Southern Corp. (NYSE:NSC), BCE Inc. (NYSE:BCE), and Vodafone Group Plc (NASDAQ:VOD). All of these stocks’ market caps resemble DG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RACE 29 1729509 -7
NSC 51 1172825 -1
BCE 13 204550 -6
VOD 14 598782 -2
Average 26.75 926417 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $2103 million in DG’s case. Norfolk Southern Corp. (NYSE:NSC) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Dollar General Corp. (NYSE:DG) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on DG, though not to the same extent, as the stock returned 18.8% in Q2 (through May 22nd) and outperformed the market as well.

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