WMT), the behemoth out of Bentonville, Ark. There's probably a Wal-Mart within driving distance of your home and you've probably visited it within the last 30 days. Wal-Mart is everywhere! The problem is, it's gotten so big it became a math problem. Now I'm a number cruncher. I'd much rather see the numbers of a company than a CEO flapping his mouth, telling me how good his company is. My point is that at one time Wal-Mart was a great stock. But today it is no longer a double-digit grower. It is a single-digit grower. Wouldn't you have liked to have bought Wal-Mart in the early days? I look for companies today that are like WMT was in its early days. For instance, Dollar Tree ( DLTR). Dollar Tree is a stock that I wrote about back in 2011 in my book Best Stocks Now! Companies. It is still performing way better than everyone else and it's still undervalued. Stocks like this may never end up in the Dow, but if it can -- from its current market cap of $12.8 billion to $20 billion -- I would be OK with that. I have already made 142% in the stock once.
Data from Best Stocks Now App The first time around with DLTR, I more than doubled my money. Then the shares started to cool off and I moved on. Well, it started heating up again earlier this year so I got back in and it's on the move once again. DLTR is a stock that I currently own in my conservative growth accounts. It is a $12 billion company -- a little, tiny, large-cap stock. By contrast WMT is a mega-cap stock at $244 billion.
I would rather own a stock that is hitting new highs than one that is going down. I would rather own a stock that is hitting new highs that one that is hitting new lows! This is where valuation comes into play.
Data from Best Stocks Now App Dollar Tree is currently trading at 17 times forward earnings, which is a slight discount to the market. It's expected to grow those earnings by 17%, so it has a PEG ratio of 1.01. All things equal, you should get 17% per year in returns on DLTR going forward. It's simple math, but that doesn't necessarily mean there's a guarantee. You still have to babysit that holding every day to make sure it's staying on track. Now every once in a while, the stock is going to be derailed a little bit. But as long as it stays on course, stay with it. You want big gains in the market. If it goes, of course, you sell. Dollar Tree is currently a stock that is exhibiting to those of Wal-Mart many years ago. Courtesy of StockCharts.com Wednesday, DLTR broke out to a new all-time high. If the valuation justifies it, and in DLTR's case it does, I would absolutely buy a stock that's hitting a new high. So, it's your choice -- you could own a big, stodgy, old stock of yesteryear, or you could drop down a notch into the second or third tier and shop around the aisles of the stock market that still offer big potential. DLTR comes in at #83 out of 3,546 stocks. Clients of Gunderson Capital Management are currently long the stock. Data from Best Stocks Now App At the time of publication, Gunderson was long DLTR. Follow @billgunderson This article was written by an independent contributor, separate from TheStreet's regular news coverage.