Update Dollar General--stock gets a (modest) bump from addition to S&P 500 index

11/27/2012 2:30 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

A very modest bump—0.71% as of 1:30 p.m. New York time—for Dollar General (DG) today. Last night Standard & Poor’s announced that it would add Dollar General to the S&P 500 index to replace Cooper Industries (BE), which is being acquired.

Index funds will have to buy about 29 million shares of Dollar General—or 9.5 days of average trading volume—to keep their portfolios aligned with the index.

That extra buying comes at a good time for Dollar General shares. At $49.66 the shares have just edged above the 50-day moving average at $49.39. The buying from index funds should provide support for the stock at this level and the cross above the 50-day moving average should attract some interest from technicians.

I added the stock to my Jubak’s Picks portfolio http://jubakpicks.com/ on November 26 because, while I think the U.S. economy is in relative terms stronger than expected, in absolute terms it’s still not very strong. That should be a good environment for low-price retailers such as Dollar General. My target price remains $57 a share.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Dollar General as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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