Subject: Re: DG on sale today
What's DGs moat? Or is it just a trade from 150 to 250, no guarantee it'll get there. It doesn't seem to have the characteristics of a long term compounder.

The dollar store business is indeed simple, in many ways.
Buy REALLY cheap things, add a big mark-up, and sell it cheaply. No bad receivables, no dodgy securitizations or refinancing risks.

But the execution is remarkably difficult. The supply chain and purchasing side is very difficult to do well--both huge and nuanced.
And there is a lot of magic sauce in good old fashioned merchandising.
There is a reason they make oodles of money year in and year out, and that (say) Walmart hasn't crushed them.
They are, in their own niche, apex predators of competition.

The thing I always find entertaining is how they go out of fashion with a price crash every couple of years, then fully rebound.
I can't even count the number of times I've bought low and sold high. Made enough to buy a couple of houses, say.
(note, I don't sell high unless I have something better do do with the money--they also make great long term positions, but that's not my personality)
Every time the price crashes, the natural reaction is to think that Mr Market knows something you don't. They're doooooomed!
But nope, they just have prices that wander around a lot for some reason.

It's worth noting that, despite the current huge sell-off, DG has returned 12.7%/year compounded in the last decade,
(beating the average S&P 500 firm by 2.1%/year and BRK by 1.4%/year), with essentially no risk given the robustness of the profit stream and balance sheet.
If today's price were back to its 52 week high, that number would be 18.9%/year compounded. Sounds like a long term compounder to me.
I would not be surprised to see the next few years turn out with >= 9%/year growth in value per share plus a one-time boost of >= 1/3 in the valuation multiples.
Those are relatively conservative figures compared to historical results.
Things could turn out a lot worse than that and still represent a good investment from here.

A quick glance at the last 12 years of headline earnings and multiples: https://bigcharts.marketwatch....
Quick summary: their earnings are mostly pretty steady, so old fashioned P/E is mostly a not-bad valuation metric for them.
On that simple basis, the firm is currently the cheapest it has been in a dozen years.
If historical trends of net margins and multiples were continuing, the price would be around $225 now, not $132.
Historical trends are not holding this year, but nor is the world coming to an end for them.

Of course, as always, I might be wrong : )

Jim