Dollar Stores For A Cheap Market

The broader markets are getting hammered, but one sector, the dollar stores, are holding up. Names like Family Dollar FDO, Dollar General DG, and Dollar Tree DLTR are all hovering near the flatline, or slightly negative. This comes as the broader markets are all down around 1% or more, and the Dow Jones Industrial Average has broached the 12,000 level. These names look to be holding up the best as the economy appears to be slowing, and consumers are making every dollar they spend count. The sector has also had a boost recently from hedge fund honchos such as Nelson Peltz and Bill Ackman. At the Ira Sohn Conference a few weeks ago, Ackman said that he had a stake in Family Dollar, and believed the company was worth $70 if it was able to make the operational improvements the company's management has talked about doing. 99 Cents Only Stores NDN is also a name that has been in the spotlight recently, after the company received an offer from Leonard Green earlier this year. Ackman said that Dollar General has done a much better job of growing since it was spun out of KKR. The company has higher margins, sales per square foot, and faster growth. The company has also increased the hours its stores are open. Ackman announced yesterday that he had increased his stake in the company, going from 4.7% to 8.9%. Ackman and Peltz are in a sort of battle in Family Dollar, as Peltz has put forth an offer for the company to take it private, but Ackman believes the offer is severely undervaluing Family Dollar.