As to today’s recommended stock, it begins with a story.
Last Wednesday just before noon, as I was packing my car for the drive to the forum in Vermont, I was also fixing a door for my wife, grabbing a bite to eat, and packing some supplies to take to our son, the last child of the three still in college. In short, I was multi-tasking, which is not always the best way to get things done.
And for the first time in my life, I left on a trip while leaving something big behind. But I didn’t know it until an hour later, when my wife called to inform me I’d forgotten my bag with my toiletries, underwear and socks. Happily, the garment bag I’d packed held my jacket, shirts and ties, so I decided I could buy what I needed on the way. And a quick look on my phone led to a mall in Manchester, New Hampshire, which held both a Big K (long ago known as Kresge’s) and a Dollar Tree Store. The Dollar Tree Store provided:
One five-pack of disposable razors.
One pack of two yellow lined pads
One pack of two pens
One toothbrush
One tube of toothpaste
One pair of black socks
And another pair of black socks
For a grand total of $7.00! (There’s no sales tax in New Hampshire.)
And the Kmart provided the underwear, for substantially more.
Now I know why Dollar Tree (DLTR) has more than 4,100 stores in 48 U.S. states, and why business is booming!
The stock was first recommended in Cabot Top Ten Trader on June 20, when it was trading at 64. Today it’s at 80! And last week it appeared in Cabot Top Ten Trader again, tagged as the Editor’s Choice. Here’s what Michael Cintolo wrote.
“The reason for Dollar Tree’s strength is simple–a bad economy and jobless situation, along with some of the worst consumer confidence readings in decades, is leading more people to pinch pennies. Interestingly, though, this company isn’t just benefiting from the dip in the economy during the past few months; there looks to be something of a secular trend benefiting the dollar store industry, as Dollar Tree’s earnings per share have been motoring consistently higher for years ($1.23, $1.41, $1.69, $2.37, $3.23 during the past five years, with $3.94 and $4.59 estimated for this year and next). According to one recent report, part of the reason is just a broad moneysaving mindset among all consumers; all firms in the industry are seeing the average income of their customers rise, telling you it’s not just hard luck Joes, but many solidly middle-class folks just trying to save a buck. As for the company itself, it distinguishes itself from competitors by sticking to the $1 price point for thousands of items, but at this point, the sector story is more important than anything specific to one company.
“DLTR has been in a tight, controlled uptrend since early 2010, with the usual retreats along the way when the market hit a pothole. This stock did fall from 70 to 60 during the market crash, but rallied back to virgin territory by the end of August, and has pushed slightly higher since then. Thus, DLTR can drop when the market gets rough, but usually finds buyers on those dips. So if you want in, try to pick up a few shares in the low-70s, where the 50-day line and the top of the stock’s prior consolidation should lend support.”