Dollar Tree (DLTR) Rose Following the Divestiture

The London Company, an investment management company, released “The London Company Mid Cap Strategy” second quarter 2025 investor letter. A copy of the letter can be downloaded here. US equities saw a double-digit surge in the second quarter following a sharp decline in the first quarter. The mid-cap composite rose 5.7% (5.5% net) in the second quarter, falling short of the Russell Midcap Index’s 8.5% increase. Please review the fund's top 5 holdings to gain insight into their key selections for 2025.

In its second quarter 2025 investor letter, The London Company Mid Cap Strategy highlighted stocks such as Dollar Tree, Inc. (NASDAQ:DLTR). Dollar Tree, Inc. (NASDAQ:DLTR) is a discount retailer. The one-month return of Dollar Tree, Inc. (NASDAQ:DLTR) was 11.63%, and its shares gained 10.21% of their value over the last 52 weeks. On July 29, 2025, Dollar Tree, Inc. (NASDAQ:DLTR) closed at $114.99 per share, with a market capitalization of $23.998 billion.

The London Company Mid Cap Strategy stated the following regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its second quarter 2025 investor letter:

"Dollar Tree, Inc. (NASDAQ:DLTR) – DLTR was a top performer after it reached an agreement in March to sell its underperforming Family Dollar business, a decade-long drag on growth and margins. This divestiture has driven a stock re-rating, reflecting a higher-quality company focused on value creation at the Dollar Tree banner. The recent elimination of the de minimis exemption has yielded positive sentiment towards retailers like DLTR. We remain attracted to its pricing flexibility and margin enhancement opportunity.

Increased: Dollar Tree, Inc. (DLTR) – Added to DLTR following the sale of Family Dollar. Shares of DLTR were very weak in 2023 and 2024 as the company struggled to turn around and/or find a buyer for Family Dollar. Post the Family Dollar sale, we believe DLTR margins could improve while the stock trades at only 9x EV/EBITDA. DLTR will also have a large tax loss carryforward to reduce future taxes."

Dollar Tree, Inc. (NASDAQ:DLTR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held Dollar Tree, Inc. (NASDAQ:DLTR) at the end of the first quarter, which was 64 in the previous quarter. While we acknowledge the potential of Dollar Tree, Inc. (NASDAQ:DLTR) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Dollar Tree, Inc. (NASDAQ:DLTR) and shared the list of defensive stocks billionaires are buying amid US trade tariff uncertainty. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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