We recently published a list of the 10 Best Discount Store Stocks to Invest In. In this article, we are going to take a look at where Dollar General (NYSE:DG) stands against the other best discount store stocks to invest in.

Is Inflation and Slow Economic Growth on the Horizon for the US?

The market is abuzz with concerns about the economic growth of the US, with inflation-related worries infesting consumer confidence. These factors are gaining force as the tariff deadlines imposed by President Trump on Canada and Mexico steadily approach after a delay in February. Investors are also skeptical about the labor market impacts of the initiatives taken by Elon Musk’s Department of Government Efficiency (DOGE).

The Conference Board reported that the consumer confidence index fell 7 points to 98.3, experiencing its largest fall since August 2021 and below the Dow Jones forecast of 102.3. In addition, The Expectations Index dropped to a 72.9 reading, reflecting a decrease of 9.3 points. The measure has tumbled below the level consistent with recession for the first time since June 2024.

These trends show that consumers are becoming increasingly pessimistic about the country’s economic outlook, and this pessimism reached new heights in February due to skepticism surrounding rising inflation and a slowing economy, according to the Conference Board. CNBC reported that Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said the following about the situation:

“The present situation index improved, but consumers expect dark skies ahead. Change can be scary, so it’s not surprising that confidence is falling.”

Joseph Trevisani, senior analyst at FXStreet in New York, expressed similar sentiments, as reported by CNBC:

“There’s going to be a lot of back and forth on Trump’s initiatives, and certainly markets in general long term, don’t like tariffs. There’s definitely nervousness out there because some of these things could go the wrong way. Certainly, inflation hasn’t shown any sign of further retreat.”

We discussed the major drop in consumer sentiment in a recently published article on the 10 Cheap Food Stocks to Buy According to Hedge Funds. Here is an excerpt from the article:

“Economists and experts opine that the situation is unpredictable and worrisome. Trump’s tariffs may ignite another bubbling of inflation in a scenario where the Federal Reserve is weighing the odds of whether to slash interest rates further or hold steady as experts and policymakers chalk out the effects of the President’s aggressive trade and fiscal policies, as reported by CNBC.

Consumers are reflecting the worries of economists and experts, as the 12-month inflation expectations rose to 6%, up from 5.2% in the last month and considerably higher than the Fed’s steady goal of 2%.

Treasury Secretary Scott Bessent rang caution bells regarding “sticky” inflation and the potential for slow growth. He attributed the cause to former President Biden’s administration, saying that he fostered an economy too dependent on government spending. He said the government’s plan now is to develop a more diverse economy through deregulation, tax cuts, and tariffs”.

READ ALSO: 10 Cheap Food Stocks to Buy According to Hedge Funds and 12 Best Grocery Store Stocks to Buy Now.

What Are American Consumers Feeling?

CNBC reported that the University of Michigan consumer survey for February reflected similar consumer sentiments. Respondents expect the inflation rate to be around 4.3% a year from now, reflecting a 1 percentage point jump from January and the highest level since November 2023. The news channel reported that Robert Frick, corporate economist at Navy Credit Union, said the following about the situation:

“Higher prices from tariffs are the number one financial concern for Americans, as the weight of inflation is still oppressive to family budgets, especially among those with lower incomes. Even slight increases in prices, especially in top pain points such as food, shelter, and transportation, would be acutely felt by millions.”

Since potentially higher prices in the future are a major concern for millions of Americans, consumers may increasingly direct their attention towards discount stores and value deals to make their way through the scenario.

Our Methodology

We sifted through stock screeners, online rankings, and ETFs to compile a list of 15 discount store stocks. We then selected the top 10 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A busy shopping aisle filled with discounted items in a retail store.

Dollar General (NYSE:DG)

Number of Hedge Fund Holders: 53

Dollar General (NYSE:DG) is a retailer that offers an elaborate array of merchandise in its stores, including consumables, beverages, seasonal items, and more. Its merchandise collection includes its own private brands and brands from manufacturers.

In fiscal Q3 2024, the business generated cash flows of $2.2 billion from operations, an increase of 52% due to improvements in Dollar General’s (NYSE:DG) working capital position, mainly through inventory management. Its net sales grew by 5% to $10.2 billion in fiscal Q3 2024. The company raised its market share in both dollars and units in highly consumable and non-consumable product sales during the quarter. Its same-store sales also rose by 1.3%, attributed to 1.1% growth in the average transaction amount, including the average unit retail price per item and the increase in average items per basket.

The company’s primary priority is investing in its business, including its existing store base and organic growth opportunities, such as strategic initiatives and new store expansion. Dollar General (NYSE:DG) has strong growth projections and estimates a 7% increase in cash flow and 11% growth in earnings annually over the coming years.

Overall, DG ranks 6th on our list of the best discount store stocks to invest in. While we acknowledge the potential of DG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.