[Spooky23]

Dollar General is a refinement of Ray Kroc’s McDonalds model for passive investors. Their magic is net leasing in shitty areas with barebones stores, so they don’t hold many obligations on their balance sheet, and don’t spend a lot on building upkeep and taxes. It is basically a ground lease and a bond alternative.

That works because it’s an investment that lets passive investors yield 5-7%, which is a good yield from a company with a good credit rating.

As rates rise, it gets less and less attractive, especially as leases start maturing, growth slows, and you need to put capital dollars into cheap buildings that you don’t own. It’s not a bad company, but it’s no Walmart.