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Insiders Sell $1.5 Billion of Dollar General Shares: What Do They Know?

Dee Gill

A long list of insiders just dumped a whole lot of Dollar General (DG) shares, which of course makes us wonder what they know. The last time there was such a flurry, as seen in a stock chart, the share price fell some 16% before turning around. Note the fall-off in the weeks after Oct. 3 selling by both executives and its majority shareholder, Kohlberg Kravis & Roberts (KKR).

DG Chart

Last week, many of those same insiders sold again, dropping some $1.5 billion in shares of the now $16.53 billion market cap company. KKR dropped its stake to about 7.4% from 16.4%. Warren Buffett’s Berkshire Hathaway (BRK-B) got out of the company in the third quarter of 2012.

Buffett aside, few major investors have let go of Dollar General lately. Its budget-attuned pricing has appealed to shoppers during the depths of the recession and the nascent recovery alike, and its profits have soared. Billionaire fund manager Stephen Mandel bought last year. Dollar General made up about 3.8% of his Lone Pine Capital fund by the end of the first quarter. The shares also are a popular analyst pick, carrying about twice as many buy and overweight ratings as holds.

Investors diverge on their impressions of how fast the company can continue to grow. Revenues have grown to $16 billion from about $6.28 billion in the past decade, and profit growth has been strong in recent years. The company will open some 630 new stores this year. It forecasts 11% revenue and EPS gains this year, including 4% to 6% same store sales gains. It sounds great for a retailer these days, but that’s slower growth than in the past. The company also hints that its big profit margins may narrow a bit.

Dollar General shares are up about 86% in the past three years, but its PE ratio of 15.4 is far lower now. On a forward basis, the shares trade at a slight premium to competitors Family Dollar Stores (FDO) and Wal-Mart Stores (WMT). Shares of Dollar Tree Stores (DLTR) remain more expensive but less well liked by analysts for today’s investors.

DG Forward PE Ratio Chart

It should be noted that these sales mark reduction in stakes rather than exits from Dollar Tree. Then again, Buffett walked away.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.

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