The Reject Shop – a reject or a buy?

Founder and Chief Investment Officer of Montgomery Investment Management
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The Reject Shop (TRS) is a discount-variety retailer that has been a standout performer since it listed on the ASX in 2004 and a standout performer for The Montgomery Fund. We know that buying retailers early in their roll out and holding until 80% of the rollout is complete can be a very rewarding investment experience. The shares alone have increased by nearly 800% in less than a decade since listing. Add dividends to the return and you’ve trounced the broader market. As owners of the Reject Shop and as believers that consumer sentiment in Australia is currently improving, it’s worth understanding this business.

As you know, The Montgomery Fund is an investor in businesses rather than a trader of ‘stocks’ and so rather than chat to you about ‘rotation out of defensives into cyclicals’, or some other nonsense, we’d rather highlight two past investments made by The Reject Shop to illustrate their impact on the business and the resultant investment returns.

In order to achieve its (entirely justified) popularity in the market, the company has made critical investments over the years in order to build (and protect) what we believe have been sound competitive advantages.

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