By Justin Spittler, editor, Casey Daily Dispatch
Dollar General is growing like crazy.
It’s the second-largest U.S. dollar store chain.
This year, it opened more than 1,000 new stores and relocated another 700. Next year, it plans to open another 900 new stores, renovate 1,000 more, and relocate another 100.
Dollar General isn’t the only discount store that’s growing fast, either.
• Dollar Tree built 900 new stores last year…
Dollar Tree is the largest U.S. dollar store chain. It now operates nearly 15,000 stores nationwide.
But it ultimately plans to operate 25,000 U.S. locations.
That’s an ambitious goal. Many people don’t think the company will pull it off, including one analyst I work with.
On Saturday at our company holiday party, he told me “there’s no way the company can grow that quickly.”
So, he’s shorting (betting against) Dollar Tree’s stock.
• I told him he’ll probably regret that…
That’s because dollar stores aren’t like most retailers. As I showed you a couple weeks ago, they can make money in any environment.
That’s because they sell basic goods like shampoo, toothpaste, and laundry detergent. People buy these essential items no matter what’s happening with the economy.
But that’s not the only reason I’m bullish on Dollar Tree and Dollar General.
The customer base for dollar stores is also getting bigger by the day…thanks to a disturbing trend.
• The U.S. middle class is disappearing…
The “middle class” refers to households that make between two-thirds and twice the national median income. These days, that means a total household income of $39,359–$118,078.
For decades, the middle class was the backbone of the U.S. economy. But it’s been a different story since the start of the century.
According to a study from the Pew Research Center, the U.S. middle class shrunk in 203 of the 229 metropolitan areas between 2000 and 2014.
Now, while it’s true that some people are climbing out of the middle class, most are becoming poorer.
In other words, the middle class is being replaced by a permanent underclass.
This is a problem for society, the economy, and any company that depends on a healthy middle class. But it’s an opportunity for discount stores.
I’ll explain why in a second. But let me first tell you why the U.S. middle class is rotting away.
• U.S. wage growth has come to a standstill…
Just look at the chart below.
It shows how much real (inflation-adjusted) wages grew between 1979 and 2016. It’s broken up by income level.
You can see that real wages for the top 20% of Americans are up 27.4% between 1979 and 2016.
Wages for the middle 20% of Americans have grown just 3.4% over the same period.
The bottom 20% of Americans have fared much worse. Their real wages are down 1% since 1979.
This is troubling. Unfortunately, the situation will get worse before it improves.
• That’s because the U.S. middle class is more fragile than ever…
This isn’t my opinion. It’s simply the facts.
You see, about 38 million households in the U.S. now live paycheck to paycheck. They barely make ends meet.
And I’m not just talking about poor American families.
About two-thirds of this group (25 million households) earns a median income of $41,000. That’s well above the national poverty line.
But these families are a medical emergency away from going bankrupt.
In fact, according to a new survey, nearly 60% of Americans have less than $1,000 in savings. As if that weren’t bad enough, 39% of Americans have no any savings at all. That’s up from 34% last year.
This is an incredibly fragile situation. And let’s not forget…
• The U.S. economy is technically recovering right now…
So, you can imagine what will happen when the next financial crisis hits.
Millions of people will have no choice but to cut spending to the bone.
They’ll eat out less. They’ll take fewer trips to the mall. And they’ll stop going on vacation altogether.
This is bad news for department stores, apparel companies, and many restaurants.
But here’s the thing…
People won’t stop buying the things they need.
• Again, that’s why discount stores will continue to thrive…
They can make money in just about any environment. And they’re one of the only retailers worth owning these days.
Unlike department stores and apparel companies, they’ve been in a consistent uptrend.
Dollar Tree’s sales are up 258% since 2010. Dollar General’s sales are up nearly 100% over the same period.
Sales at Sears, one of America’s most iconic department stores, are down 74% over the same period.
So, if you haven’t already, consider buying shares of Dollar General or Dollar Tree on the next pullback.
New Orleans, LA
December 19, 2017
P.S. E.B. Tucker, editor of The Casey Report, recommended Dollar General in October 2016. His readers have already made 35% on this trade—and E.B. thinks shares are headed much higher in the coming years.
E.B. also has a handful of other companies in buy range that are set to thrive no matter what happens with the economy. You can access these names with a risk-free trial subscription. Click here to learn more.
Chart of the Day: Uranium’s Rally Is Just Beginning
By Joe Withrow, analyst, Casey Research
The “rip your face off” rally in uranium stocks just began.
At Casey Research, we’ve been waiting for this to happen since the summer. In fact, we told you to expect this massive rally back in July.
The Global X Uranium ETF (URA), which tracks 22 uranium stocks, shot up 32% from its 2017 low.
And as you can see from today’s chart, URA has jumped more than 30% since late October.
The reason for this is simple: the price of uranium fell 90% over the past 10 years… to levels that are well below the cost of production. That means uranium miners have been losing money on every pound of uranium they produce.
To combat this, uranium miners have been slashing production and scaling back output for several years now. This is leading to a supply crunch that will send uranium prices soaring.
The last great uranium bull market was from 2002 to 2007… and the price of uranium exploded from $9 to $136 per pound.
With 447 nuclear reactors operating around the world… and 347 more reactors proposed… we can expect demand for uranium to increase even as supply cuts work their way through the market.
And that means URA’s rise is just beginning. Expect much higher prices going forward…
Today, a reader responds to Doug’s interview on why millennials favor communism:
I do not blame the Millennials for favoring communism. The current capitalist system has quite clearly failed them. Having lived under communism, I do not favor it myself. I do however think what we need is another capitalism reboot, such as the FDR New Deal, which redistributed the wealth of the 1% and engendered economic prosperity for nearly half a century.
In Case You Missed It…
Bitcoin is skyrocketing. But Bonner & Partners’ top technology expert, Jeff Brown, says that 99% of investors are missing the real story…
It’s the technology behind bitcoin, not the cryptocurrency itself, that will change the world. And Jeff’s found a way for readers to invest in blockchain technology without purchasing a single bitcoin. Read more here.