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Mungo, any comments on the DG results? The numbers don't look great, but the price action on the stock seems too harsh.

any comments on the DG results?


There are 2 other boards where this is likely to be discussed, Falling Knives and Dollar General - . Perhaps the latter would be the most appropriate place to discuss this?

Dollar General was heavily promoted on this forum by popular posters. Some of us openly and strongly disagreed with the idea.

Just the facts.

To be fair, I believe Jim recommended DG with willingness to wait years for his expected rate of return. It wasn't recommended as a short term trade. If memory serves correct, I believe Jim recommended DG less than a year ago.

JG

As others note, another board is probably better. There's a thread at Falling Knives with some useful thoughts.

But briefly: ouch.

I doubt many expected the "shrink" to keep getting worse. The word is in quotation marks because I think it was used by a lot of retail management teams as a fashionable excuse for other problems. For example, industry wide shrink as a percentage of retail sales definitely got worse in the last couple of years, sure, but that was from a relatively recent low point...it was running not far from levels that were considered entirely normal a decade ago. 2022 was bad, but the same as 2019, and both were only a hair higher than 2010.

Of course, the issue is much more diffuse than merely shrink. Gross profit down 1.1% of sales due to four cited factors, and SG&A up 0.6% of sales for another four.

Is it a buy at $87.60 right now?
It comes down to whether you expect normalization back to how things used to work, or whether you think the basic business model is dead. If things normalize, then it doesn't particularly matter very much how long it takes, one will probably do well from here. If a material amount of the damage to the business model is permanent, then it's not a buy. e.g., perhaps it will becomes a societal norm in the places DG operates to put on a hoodie and steal whatever you like with (understandably) no pushback from the staff.

I'm sitting on my hands patiently. Not buying, not selling. There's one usually sensible first course of action when you find yourself underwater: Hold your breath.

Jim

Dollar General was heavily promoted on this forum by popular posters. Some of us openly and strongly disagreed with the idea.

Yes, picking stocks is hard...I guess that's why you never do it?

"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.
The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs..."

I believe Jim recommended DG less than a year ago

I hesitate to use the word "recommended". With rare exception, I interpret Jim's communications as his best understanding of the current state of affairs for a company. Caveat emptor. I think Jim would be the first to concede that his forward-looking assumptions could be wrong. I often interpret his posts as "bullish" or "bearish", but rarely as a "recommendation" (one "fist-pounding" post comes to mind).

That said, Jim's DG posts which I interpreted as "bullish" go back more than year, maybe 15 months ago or so (I haven't done a thorough search, sorry).

John

PS - Thanks for the posts, Jim. I've learned a lot from your posts over the years. Can I say decades now?

" Dollar General was heavily promoted on this forum by popular posters. Some of us openly and strongly disagreed with the idea.

Just the facts."

Some of us are Americans. Some of us actually visited several dollar type stores within 10 miles of our homes. Some of us actually spoke to managers of several dollar type stores with respect to retaining employees and shrink problems and warned of the problems. Carry on.

To be fair to Dealraker: Not only DG, but also Bread and something else I forgot worked out catastrophically for whoever followed Jim into them. DLTR is the big exception, which was spot on, from the direction and the timing.

While I learned my lesson and think Jim is not the most gifted single stock picker, I nevertheless would trust him with managing a good part of my money as I think his real talent is in developing successful MI strategies - - - and beyond that I am very grateful for his infinite willingness to share and advice.

Some of us are Americans. Some of us actually visited several dollar type stores within 10 miles of our homes.
I just went out to Maria's Mexican restaurant for some all-American lunch. It is across the street from a DG. Their parking lot was full. I haven't done the extensive research you have, but today's price drop looks like an over reaction, so I bought some. What price would you consider fair value?

DG is a tough business right now. You know how your insurance bills are going up so rapidly? Well DG has thousands of stores with their insurance bills going up rapidly. You know how so many are agitating for $20+/hr wages for low-end store clerks and folks who stock the shelves? Well, DG has tens of thousands of them. And you know how people are complaining bitterly about price increases at their local stores? Well, due to all the above factors, DG has to raise prices, and people don't like that. Not only that, but the average DG consumer is very price sensitive (due to necessity), and will either shop elsewhere or do without. Perhaps the only bright spot is Family Dollar going down the tubes and closing lots of locations, so maybe for some period there will be less competition in the space.

I don't know how to value something like that. So I don't buy any of it.

Yeah, cudos to Jim on the timing of DLTR. I piled into that thing in the mid eighties, and watched it nearly double. Didn’t bail however until Cramer started shouting “SHRINK, SHRINK, SHRINK!” I hardly ever listen to that guy but that was the first time he ever shook me out of a stock. I sold it all the next day at $128. Coulda, woulda, shoulda sold earlier. I just decided stock selection is not something I want to do anymore…just got lucky there. BRK and Indexing will be my MO going forward.

" What price would you consider fair value?"

To be honest, how does a low margin business overcome shrink and employee retention problems in a country that often no longer respects the rule of law?

Dollar General was heavily promoted on this forum by popular posters. Some of us openly and strongly disagreed with the idea.

Just the facts.


Yes, I think you may have already mentioned that. And it looks like you may have been right, so good for you.

From a broader perspective, these kinds of turnarounds are not something Buffett has typically had much confidence in. There are a couple of exceptions I can think of, like American Express, or a textile company I can't remember the name of. But in general, he has tried to buy solid businesses with good long term fundamentals and then just let them do their thing. DG (so far, at least) is an example that turnaround candidates don't always turn*.

Is this the bottom of the cycle, just as things start to turn, with an $87 stock price that will look like a bargain in a few years? Or is it the continuation of a long secular decline of dollar stores, with prices going lower and lower? I think you can make a good argument for either hypothesis. What do you think now?

*"Both our operating and investment experience cause us to
conclude that “turnarounds” seldom turn, and that the same
energies and talent are much better employed in a good business
purchased at a fair price than in a poor business purchased at a
bargain price."

https://www.berkshirehathaway.com/letters/1979.htm...

Some of us openly and strongly disagreed with the idea.

It was a few years ago. Some of us bought copious amounts. And then sold for a quite excellent profit.

That’s how it works.

Not always, of course, but in this case, thank you to [whoever that anonyjim] poster was. You know who you are.

who errs...".

Well, I have that part nailed!

Ah well, over time, I'm still up hugely on my various dollar store plays despite today's slap in the face with a wet fish. Their stock prices tend to be much more cyclical than their businesses, so I tend to buy low and sell high every couple/few years.

Jim

Is it a buy at $87.60 right now?

Oof! Just the other day I was kicking myself for not buying DG last year when it was 103. (I previously bought at 165 and sold out at 135.)

Now I'm thinking that down -30% today is a bit of an over-reaction.

-------------
Y'know, I get a little peeved at the Motley Fool. They had an article today "Why Dollar General Stock Plummeted to 6-Year Lows Today". At the end the article had a paragraph heading "Should you invest $1,000 in Dollar General right now?" The answer was "subscribe to The Motley Fool Stock Advisor newsletter".

The last time the stock was this low was November 2017. Their revenue today is twice what it was then. The business is not going away. The odds that there will be a decently higher price in the reasonable future would seem to be pretty good.

I'm not sure when Bread was first talked about by Jim, but I looked into it after reading about it on this board.
One account with Bread is up 43%. The other account is up 52%. All depends on when you buy.

Paul

HC: To be honest, how does a low margin business overcome shrink and employee retention problems in a country that often no longer respects the rule of law?

You should probably ask Walmart...

"Walmart earnings: Stock rises to a record as earnings show consumer resilience."

"So far, we aren't experiencing a weaker consumer overall." CEO Doug McMillon said on the earnings call.

"Dollar General Stock Slides on Earnings. Walmart Is Eating Its Lunch."

"Because consumers are prioritizing shopping for food, dollar stores are losing market share to discount grocers, such as Walmart, which have a better assortment of products."

"Dollar store operators have somewhat lost their appeal for value and convenience as other retailers like Walmart expand their omni-channel offerings
and have more levers to keep prices low."

https://www.marketwatch.com/articles/dollar-genera...

https://www.marketwatch.com/livecoverage/walmart-e...

https://mungofitch.com/

My bad, he 'suggested' DG.

JG

" You should probably ask Walmart..."

Have you ever been inside a Walmart? A Costco? WHERE do some of you peopled live? Unbelievable.

Jim recommends absolutely nothing. IMHO. He throws up ideas and discusses his own investments. I would not call that "promotion". If I decide to follow his ideas then I am sole responsible for my investment decisions.
Just my 2 Cts.

Astore

Jim recommends absolutely nothing. IMHO. He throws up ideas and discusses his own investments. I would not call that "promotion". If I decide to follow his ideas then I am sole responsible for my investment decisions.

Of course you are absolutely right with that. But I am not sure whether that does justice to the psychological complexity. For very good reasons Jim is the by far most respected poster here, as the rec's more than clearly show. If Jim says "KMX looks very interesting at this price because..." it's similar to Warren saying such. It would not only not dismissed, not only not objectively looked into, it would be treated as coming from a hugely superior investor --- as it actually does. And herein lies the danger:

As someone just wrote whether you won or lost with DG, KMX, Bread etc. depends on your entry/exit points. If Jim's suggestions fail, sophisticated investors might nevertheless have made money by for example being initially skeptical, but having bought later on the way down and sold into a recovery of the stock. And sophisticated investors as also has been written here are simply responsible themselves for what they do, whether they follow a suggestion or not.

But not everyone is a sophisticated investor and knows what he does. Is a child, following a highly admired adult into something that hurt it because it - contrary to the adult - had no realistic idea about it, is that child responsible for having being hurt?

Saying that just to give another perspective to the usual "... you are responsible for what you do". Sounds great, but I think as most short and great sounding sentences it's too simple. Life is too complex for simple formulas and responsibility very much depends on who gives advice and who receives advice. That's probably one of the reasons Warren does not give single stock advice, and I wouldn't be surprised if Jim also has many more stock picking ideas which he is cautious not to share for that same reason.

Hey, I have an idea for Jim: Maybe you should have a 2nd account here and use that to post stock ideas anonymously! To go undetected you'd have to mess up your writing style a bit and to insert here or there a logical or numerical flaw. Just write your post spontaneously and don't look at it again, don't re-read and edit it.

P.S.: This is not meant seriously, just to lighten up a thread that from starting with DG became a bit too much about Jim --- with me being very much guilty, so that I want to make up for that a little. All said and as it was mentioned there is a DG board.

Jim recommends absolutely nothing...

Hey, I'm happy to say I recommended it. I did. And I stand by it having been a pretty good call.

Sure, things have gone worse than expected at the business, but unpleasant surprises do happen. It will probably take longer to come good, meaning a lower rate of return, but from where I'm sitting the fat lady has not yet sung. I'm still long, and I don't expect to be reducing my position any time soon.

Did anyone ever notice that the Washington Post stock didn't bottom out until about two years after Berkshire bought into it? And for good reasons, too--the printers' strike was not fun. Not that this is a good call like that one, merely that it's a bit early to say my call was a bad one. Prices go up and down.

Something might happen that convinces me they're headed for much more serious trouble, or that there is a much better opportunity in front of me for the money I have in it. Until then I'm in.

Jim

" Jim recommends absolutely nothing. IMHO."

I agree, for 20 years plus Jim has been kind enough to share his thoughts, nothing more. No one bats 1000, only back seat driving fools make that claim. When posters started to talk dollar stores, I did my own due diligence, period, I had never been in a dollar store in my life. Thank you, Jim, for generously sharing your ideas for decades, even if we don't always agree. hc, an embarrassed American, for political reasons. Stay well bud.

" Of course you are absolutely right with that. But I am not sure whether that does justice to the psychological complexity. For very good reasons Jim is the by far most respected poster here, as the rec's more than clearly show. If Jim says "KMX looks very interesting at this price because..." it's similar to Warren saying such. It would not only not dismissed, not only not objectively looked into, it would be treated as coming from a hugely superior investor --- as it actually does. And herein lies the danger:"

Good morning, have you been a brk shareholder very long? I would love to see someone research how have Buffett's large sales done vs SPY the past ten years? ibm, wfc, now apple, would retail be better off BUYING his sales OR, selling behind him the past ten years? Obviously, in the case of apple buying with him was a great idea, but his sell timing for now, looks misguided. Thank you if anyone takes the time.

“Sure, things have gone worse than expected at the business, but unpleasant surprises do happen. It will probably take longer to come good, meaning a lower rate of return, but from where I'm sitting the fat lady has not yet sung. I'm still long, and I don't expect to be reducing my position any time soon.”

Agree. Disappointing loss but no realized loss. I’m sitting tight and might add a bit as -32% reaction seems overdone. Jim’s analysis, data and projections seemed very reasonable as always and his lead in DLTR 2-3 years ago made us all a bunch 2-3 years ago.

Thanks Jim for sharing your ideas so selflessly and we all take individual responsibility for a buy decision. Your ideas have made a bunch of us more than pizza & beer money!

But not everyone is a sophisticated investor and knows what he does. Is a child, following a highly admired adult into something that hurt it because it - contrary to the adult - had no realistic idea about it, is that child responsible for having being hurt?

This is a discussion board for investing. Its filled with rational discussions (mostly) held by adults, not children. It's why I come here. I don't want to be treated like a child and if I make a mistake as a grown man (or woman - there is no need for it to be a "he"), then I've had a good opportunity to learn as an adult who has to be accountable for their decisions. I absolutely can't stand the idea that good information, rationale analysis, and judgement be withheld from me because someone else feels a paternal need to look after me or other grown adults.

There are lots of reasons why Warren may not give advice that do not apply to Jim or anyone else on this board. One of them is why subject yourself to the critique of others who seem to have an axe to grind against you and constantly reference you in every single one of their posts like they obsess over you. Warren doesn't like to be critiqued and has managed to develop a glowing reputation by avoiding mistakes. But in some ways, it wouldn't make him a great participant on a stock discussion board. If we have someone willing to put out great content on which you can learn and make your own choices. Someone willing to do the work to do the things you are too lazy to do on your own. I absolutely would not want to discourage it because I want them "looking out for my best interest" as if their paternal instincts override my choices as an adult.

I would say the opposite - lets praise and encourage the behavior we would want to see. In this case, I want Jim to post more analyses and share more of his personal trades and the logic for them. I think the community would be far poorer if people spend their time trying to identify all of the places where things didn't turn out the way he thought they might (with all of the appropriate caveats he goes out of his way to provide). I would love more, not less of these ideas on the board.

How can anyone say the sale timing for Apple is wrong? The cost basis is about $34.00 a share. lol. No one is perfect at market timing especially trying to sell that much. Buffett himself even said that.

A legendary call for sure...actually multiple calls, just as were the "Apple's over-valued" calls for years relating to the Berk buy that were subject to eventual profits of over 100 bil.

It is stated here repeatedly that calls aren't made if the stock falls, that we make our own decisions, two separate things that have nothing to do with one another. Calls are admittedly made and it is unfortunately easy to see the outcome, bold to deny the outcome, but a tad on the weird side.

We mentioned on another site that a DG stock price in the $80's was more appropriate. We are here. This discussion elsewhere however, seems much more adult in pos/neg views are both laid out and appreciated and there is no poster ever who has a desire to circle the wagons to protect someone else's ego.

Astore and Said are BOTH absolutely correct.

So, dealraker - does anything strike your fancy in this market?

I agree this should be on the DG board, but it has been discussed here in the past, so I will jump in.

I bought DG at $103; I am holding and may average down a little. As WEB once said, "If you aren't willing to hold a stock for 10 years, you should not hold it for 10 minutes." I remember when Macs were catching fire and everyone was selling Apple. DG will be fine.

As far as I am concerned, if you didn't short the stock, you didn't know any more than anyone else and you probably shouldn't be bragging about how smart you are right now. In fact, you missed a huge opportunity, so you might be better off not saying anything at all. If you did short it, congrats, maybe you are a genius and I hope you will post more ideas for the rest of us!

abromber

Rebus I made a slew of posts regarding my ideas not long ago, guessing some time in Oct of 2023 but I'm not going to look back to see. As per slightly longer term on this issue? Well all the way back on the AOL board some 30 years ago and never-ending I stated that for better or worse my two largest positions were Berkshire and AJ Gallagher. I know somewhere someone has access to my "dealraker" posts, there were many, where I stated I had $500,000 of Berk and $500,000 of AJG and was retired - this in the mid 1990's.

I still own, never "locked in profits" or whatnot either. Life is great if you can stand it. The theme here as to protecting one poster? It is so lowly in stimulation and enlightenment...it screams "CHANGE SOMETHING!"

Thanks, dealraker. One could do far worse than to traverse this vale of tears with a hefty load of Berkshire and Gallagher. I wonder if Mr. Buffett ever considered a position in AJG?

In defense of dealraker, he is the only one I know who has been recommending the insurance brokers - specifically AJG and BRO for decades. At least since the turn of the millennium when I started listening. These have proven to be some of the absolute best businesses in the world, benefit from inflation, and have what Warren likes to call a royalty on an entire industry without assuming underwriting risk, many of which are required to be purchased by law or lender.

Buffett has said at least once that the brokers are the better business when discussing risk bearing insurers. He just wanted the float to invest and didn't feel he could own both.

dealraker, if you were the one who mentioned AJG, I want to thank you. If not, I thank whoever it was.

AJG & BRO, in the last 9 months has been very good to me. And to my grandkid's UMTA accounts.

So we are also super supporters of Chris Bloomstran here and of course he's been continuously loading the boat with DG each notch down. His commentary is the same, that these stand alone no competition store locations are supreme.

I see developments otherwise, that it seems to me the clear focus of management is store density, not remote locals. They are slinging stores up in areas crammed full of competition.

Not saying this won't work, but the model should be clarified further than the management jargon.

These have proven to be some of the absolute best businesses in the world, benefit from inflation, and have what Warren likes to call a royalty on an entire industry without assuming underwriting risk, many of which are required to be purchased by law or lender.

I wonder if there is any possibility of that business being disrupted by tech solutions someday? Like taxi dispatch (done), like real estate agents (in progress), human brokers (done), etc.

"To be fair to Dealraker: Not only DG, but also Bread and something else I forgot worked out catastrophically for whoever followed Jim into them. DLTR is the big exception, which was spot on, from the direction and the timing.

While I learned my lesson and think Jim is not the most gifted single stock picker, I nevertheless would trust him with managing a good part of my money as I think his real talent is in developing successful MI strategies - - - and beyond that I am very grateful for his infinite willingness to share and advice."

Two things I think worth adding. Jim has previously mentioned Alimentation Couche-Tard Inc. (ATD.TO) which I think has continued to do well since. Secondly, when Charlie was buying Alibaba stock many of the contributors on the previous board appeared to join in. Jim, from what I remember was one of the few urging caution over buying Alibaba at the time particularly because of the political risks.

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