Do You Believe in Dollar Tree's (DLTR) Exceptional Earnings Growth?

Meridian Funds, managed by ArrowMark Partners, released its “Meridian Contrarian Fund” fourth-quarter 2025 investor letter. A copy of the same can be downloaded here. U.S. equity markets experienced a quarter supported by optimism around potential monetary easing and caution related to economic growth and valuations. Early gains were driven by strong AI-related earnings and the US Federal Reserve’s rate cut in October, which improved expectations for financial conditions. However, market sentiment cooled later in the quarter. Despite this moderation, the quarter contributed positively to robust annual results. Value stocks outperformed growth, returning 3.3% versus 1.2% for the quarter. Against this backdrop, the Fund delivered a return of 2.18% (net) in the quarter, underperforming the Russell 2500 Index’s 2.22% return and the secondary benchmark, the Russell 2500 Value Index’ 3.15% return. As the market heads into 2026, the firm is closely watching factors that may affect market returns, including monetary policy changes with a new Fed Chair and the sustainability of AI investments due to high valuations among hyperscalers. In the unpredictable backdrop, the firm concentrates on its systematic and consistent investment approach, which aims to pinpoint opportunities in companies that can achieve strong performance regardless of macroeconomic factors. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Meridian Contrarian Fund highlighted Dollar Tree, Inc. (NASDAQ:DLTR) as one of its leading contributors. Dollar Tree, Inc. (NASDAQ:DLTR) operates discount stores in the United States and Canada. The one-month return of Dollar Tree, Inc. (NASDAQ:DLTR) was -0.95%, and its shares gained 64.20% of their value over the last 52 weeks. On January 27, 2026, Dollar Tree, Inc. (NASDAQ:DLTR) stock closed at $121.84 per share, with a market capitalization of $24.851 billion.

Meridian Contrarian Fund stated the following regarding Dollar Tree, Inc. (NASDAQ:DLTR) in its fourth quarter 2025 investor letter:

"Dollar Tree, Inc. (NASDAQ:DLTR) is the second-largest dollar store operator in the U.S., offering a differentiated mix of everyday needs and discretionary “treasure hunt” goods to a growing consumer base seeking convenience and value. We initiated a position in the spring of 2025 following the announced sale of Family Dollar, a failed acquisition that had clouded management’s focus on its core operations for nearly a decade. The “Liberation Day” tariffs announcement introduced fresh volatility, creating an opportunity for us to build a position. While the market grappled with uncertainty around the impact of tariffs, we were aware of Dollar Tree’s proven track record of offering a wide pricing array and sourcing from multiple regions, factors that could quickly offset margin distortions. The stock reacted positively throughout the quarter as the company’s post-tariff execution delivered year-over-year margin improvement alongside strengthening sales, particularly around holiday discretionary purchases. We continue to hold the position, as we believe the company’s renewed operational focus could lead to outsized earnings growth."

Dollar Tree, Inc. (NASDAQ:DLTR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 49 hedge fund portfolios held Dollar Tree, Inc. (NASDAQ:DLTR) at the end of the third quarter, compared to 59 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 stocks Jim Cramer discussed. In addition, please check out our hedge fund investor letters Q4 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.