Top up –  Dollar General

Dollar General operates ‘Aldi-like’ stores in the US. The entire US consumer discretionary industry has been under pressure on the back of negative news flow from department stores and Wal-Mart, but we consider their issues largely company-specific. Dollar General should continue to grow its revenues at a high-single-digit pace over the coming years with the US being much earlier in the adoption curve of smaller discount stores compared to Europe.

Margins are expanding on the back of an improvement in the product mix assortment, an expansion of private label products, the company taking advantage of a strong US dollar to source more abroad, and a consolidating dollar store industry. The strong cash flow generation is increasingly returned to shareholders through a rising dividend and mid-single-digit share buybacks, taking the total earnings growth to mid-double-digit levels for the foreseeable future. With the stock trading on 14x FY16 P/E, we would add to Dollar General today and it is the largest holding of the Henderson Global Trust.

Reduce – General Electric

We have been reducing our investment in General Electric. The company spent the past year selling off different parts of GE Capital, thereby repositioning itself as a pure industrial company and returning the proceeds to shareholders. The shares have been rewarded with strong performance and are now expensive for an industrial company, especially when you take into account that industrial peers have been selling off on the back of overcapacity in emerging markets and reduced spending by energy companies. The split-off of GE’s private label credit card business last month was the final piece in the transformation puzzle and a lack of further catalysts makes the stock vulnerable to profit taking from here in our opinion.