Why a Fund Just Added $18.5 Million to Grocery Outlet Despite a 40% One-Year Stock Slide

New York City-based Rivermont Capital Management disclosed a buy of Grocery Outlet (NASDAQ:GO) shares, increasing its position by nearly 1.1 million shares in an estimated $18.51 million position change, per a November 13 SEC filing.

What Happened

According to a filing with the Securities and Exchange Commission dated November 13, Rivermont Capital Management increased its holdings in Grocery Outlet (NASDAQ:GO) by nearly 1.1 million shares during the third quarter. The position's reported value rose to $21.67 million as of September 30, reflecting both new share purchases and changes in market price.

What Else to Know

Top holdings after the filing:

• NASDAQ:STX: $35.46 million (9.37% of AUM)
• NYSE:FERG: $32.29 million (8.5% of AUM)
• NASDAQ:WTW: $29.40 million (7.77% of AUM)
• NYSE:CLH: $28.48 million (7.5% of AUM)
• NASDAQ:WDC: $27.08 million (7.15% of AUM)

As of Friday, shares of Grocery Outlet were priced at $10.27, down nearly 40% over the past year and well underperforming the S&P 500, which is instead up about 15%.

Company Overview

Company Snapshot

• Grocery Outlet offers a wide range of grocery products, including dairy, deli, produce, meat, seafood, general merchandise, health and beauty care, frozen foods, and beer and wine.
• The company operates a network of independently operated stores.
• It appeals to consumers looking for value in their grocery purchases, with a presence in multiple U.S. states.

Grocery Outlet operates hundreds of stores in several states by leveraging a model where independent operators run each location. The company focuses on offering name-brand products at significant discounts, appealing to consumers looking for value in their grocery purchases. Its scale and sourcing strategy provide a competitive edge in the discount grocery sector.

Foolish Take

Grocery Outlet’s stock has been cut nearly in half over the past year, but the underlying business is still growing. In the third quarter, net sales rose 5.4% to $1.17 billion, driven by new store openings and positive traffic, even as the average transaction size fell and margins compressed. Adjusted EBITDA came in at $66.7 million, down from $72.3 million last year, reflecting heavier promotions and restructuring costs tied to pruning underperforming growth initiatives.

That backdrop helps explain why the shares are cheap and why conviction matters. This fund’s move wasn’t about momentum. It was about scale and survivability. Grocery Outlet ended the quarter with 563 stores across 16 states and continues to expand selectively, while management believes store refresh initiatives can reignite same-store sales in 2026. Context matters too. The fund’s top holdings skew toward established, cash-generating businesses rather than high-growth fliers. Grocery Outlet fits that mold as a battered but durable operator with a differentiated discount model.

Glossary

13F reportable assets under management (AUM): The total value of securities a fund must report quarterly to the SEC on Form 13F.
Assets under management (AUM): The total market value of investments managed by a fund or investment firm.
Stake: The ownership interest or position an investor holds in a company.
Top holdings: The largest investments in a fund's portfolio, typically ranked by market value.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Independently operated stores: Retail locations run by independent operators rather than by the parent company itself.
Discount grocery sector: The industry segment focused on selling groceries at lower prices than traditional supermarkets.
Market price: The current price at which an asset or security can be bought or sold.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.