Pitch from the VALUEx conference; Bill Ackman's new fund; Another flying trick

1) At the VALUEx conference in Switzerland last week, John Zolidis of Quo Vadis Capital gave an excellent pitch for discount variety retailer Dollar Tree (DLTR).

You can see his 21 slides here, watch his six-minute presentation here, and check out his website here. If you're interested, you can also sign up for his investing newsletter here.

Dollar Tree's stock has done extremely well over the long term, as you can see in this chart:

Trading at 23.7 times this year's estimates with a more than $30 billion market cap, the stock doesn't appear cheap. But Zolidis thinks Dollar Tree has room to increase prices, which will drive profits (and the share price) higher.

For 35 years, the company kept the prices of nearly everything at $1 (consistent with its name). This led to stagnant sales per square foot and profit margins, as Zolidis shows in this slide:

Then in 2022, the company finally raised prices to $1.25... which immediately translated into higher sales and margins:

Zolidis' investment thesis going forward is that the "multiyear benefit to Dollar Tree from adding higher prices to the mix is just getting started and is underappreciated." He adds:

Zolidis thinks the stock could jump by 50% to 80% in the next two years:

And as he concludes:

Thank you for sharing, John!

2) My college buddy Bill Ackman of Pershing Square Capital Management announced in a post on X yesterday that he plans to start a new fund for retail investors, Pershing Square USA, which will trade on the New York Stock Exchange. You can read the prospectus here.

Bloomberg columnist Matt Levine had a smart analysis of it yesterday: Bill Ackman Wants Your Money. Excerpt:

...Ackman apparently expects to raise $10 billion in the new fund.

I guess the question here is: Why now? Why did Ackman launch a European public fund 10 years ago, and decide now to launch a U.S. one?

Here are two ways of thinking about it. One is that PSH has generally traded at a discount to its net asset value: It has about $14.6 billion of assets under management, $12.2 billion of net asset value (after subtracting leverage), but a market value of only about $9 billion, a 26% discount. The market does not give Ackman full credit for his portfolio. And that discount has largely grown over time; it was smaller when PSH launched than it is now.

One thing that this means is that Ackman can't raise more money efficiently in PSH: Selling new shares at a discount to net asset value would dilute existing shareholders (including himself). Another thing it means is that stock buybacks are efficient: PSH can buy its own shares back for less than they're worth, which is accretive...

Presumably the expectation is that, by increasing the number of investors who can own some flavor of Pershing Square, Ackman will be able to raise money at less of a discount. (Maybe a premium?)

3) I had a splendid flight home from London Gatwick to JFK yesterday afternoon (connecting from an early morning flight from Tel Aviv)...

I paid $170 extra (from $280 to $450) to upgrade to the premium economy cabin. Because it was nearly empty, I was able to jury-rig a nearly flat-bed setup, as I show in this one-minute video. It enabled me to get six hours of much-needed sleep!

Here's the Norse Atlantic plane I flew on:

Best regards,

Whitney

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