Why Dollar General and Dollar Tree Stocks Are a Bargain -- Plus Jim Cramer's Take

Editor's Note: This article was originally published on Real Money at 1:30 p.m. on June 2.

It turns out that so-called dollar stores -- which are known for luring customers through steep product discounts -- could be also the best place to hunt for bargains in the stock market, say analysts.

Research firm BTIG named Dollar General (DG) and Dollar Tree (DLTR) among its top picks for 2016, as analysts believe that the shares may be significantly undervalued. Many investors are overlooking the long-term ability of those firms to persevere even in economic downturns, BTIG analysts wrote in a Wednesday report.

According to BTIG, Dollar General and Dollar Tree shares are likely to be worth as much as $105 and $104, respectively, over the next 12 months, which is 15% and 14% above midday trading levels Thursday.

Dollar General, the larger of the two companies by market cap, is coming off its 26th consecutive year of same-store sales growth, "a feat unmatched to our knowledge," the analyst team noted, highlighting that the Goodlettsville, Tenn.-based company's growth has been remarkably undeterred by the 2008 financial crisis and cyclical pressures on U.S. retailers.

And Real Money's Jim Cramer agrees that these bargain chains could offer sustainable growth opportunities for shareholders, particularly because the U.S. economy, through a combination of rising rents and stagnant wages, is prompting many families to seek out the discounts these stores offer.

"In that environment, many individuals resort to the 'bargains' that are Dollar Tree and Dollar General. It is true that the prices are lower," he said in a recent Real Money report.

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