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Anti-Black Friday play: Hedgies buy Dollar Tree

A Dollar Tree store in Miami
Getty Images
A Dollar Tree store in Miami

High-end retailers are suffering with Whole Foods, Nordstrom, and Macy's shares all down by double-digit percentages this year.

Perhaps investors should instead follow the smart money into the opposite end of the customer demographic spectrum, a dollar store retailer.

Bob Sasser, Dollar Tree's CEO, extolled the virtues of the value stores.

"Our model has been tested by time and validated by history," he said during the third-quarter conference call on Tuesday, according to a FactSet transcript. "For 31 consecutive quarters, Dollar Tree has delivered positive same-store sales increases through good times and difficult times and all retail cycles. Consumers are looking for value no matter the state of the economy."

Steve Mandel's Lone Pine Capital is aggressively buying shares of Dollar Tree.

Lone Pine, which owned no shares of Dollar Tree at the end of June, purchased 5.1 million shares during the September quarter, and added 8.1 million shares mid-November, for a total of 13.2 million, according to a 13G filing released Monday.

Mandel is considered among hedge fund investors to be one of the best managers in the industry.

"I think Steve is one of the very unique individuals in our business who is both a great analyst and a great portfolio manager. Most are great at one or the other, but Steve is world-class in both areas," Mark Yusko, CEO of Morgan Creek Capital Management, an alternative investment firm, wrote in an email.

Mandel honed his craft as the consumer analyst for Julian Robertson's Tiger Management and now manages more than $36 billion of assets .

His Lone Cascade fund, a long-focused investment vehicle, posted a 12 percent annualized net return since 2005, compared with a 6.6 percent annualized return for the S&P 500, according to an investor letter sent to clients Oct. 14. This year, the fund is down 2.5 percent.

Here's why Lone Pine is bullish on Dollar Tree.


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