After last quarter, it looked like money did not grow on trees. This quarter tells an entirely different story.
Dollar Tree DLTR reported much better than expected earnings this morning,FDO, while Buffett is in Dollar General DG. Consumer spending has kept pace, but we are increasingly seeing an "hour glass" economy. The super wealthy are doing well, and the middle income consumer is being pushed down to the lower class. As this demographic change continues to happen, money is flowing to the dollar store space. This comes as the expense of Wal-Mart WMT and perhaps even Target TGT.
After last quarters' earnings miss, the optimism was removed a little. This quarter has changed that mindset as we head into 2012. Shares are trading at 16 times projected 2012 earnings, and if the middle income consumer continues to get squeezed, those estimates could prove conservative.
This quarter proves that money really does grow on trees. You just have to know which tree to look for.
ACTION ITEMS:
Bullish:
Traders who believe that the U.S. economy will slow and consumers will flock to dollar stores might want to consider the following trades:
This line of thinking is bearish for the U.S. economy. It's not encouraging to see consumers trade down. It generally means a recession is happening or is about to happen.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
Market News and Data brought to you by Benzinga APIsBullish:
Traders who believe that the U.S. economy will slow and consumers will flock to dollar stores might want to consider the following trades:
- Consider any of the names mentioned above. Ackman believes Family Dollar is worth $70, and Buffett moved into the best in class, Dollar General.
This line of thinking is bearish for the U.S. economy. It's not encouraging to see consumers trade down. It generally means a recession is happening or is about to happen.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Posted In: EarningsLong IdeasNewsGuidanceShort IdeasTrading IdeasBill AckmanNelson PeltzWarren Buffett
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