Gordon ReidCostco Wholesale CorporationCOSTWEAK BUYSep 30, 2014

Last Thursday they reported a healthy top and bottom line beat, 15% earnings growth, worldwide membership renewals increased to 89%, executive memberships doubled to a record level, now accounting for 75.6% of all sales. But total membership growth slowed again. Membership under age 40 has grown nearly 60% since Covid. Web business, small appliances, home furnishings are growing. He hasn't a convincing story from management about how to get younger customers who signed up online to renew. Trades at 40x PE.

Their latest numbers were good, but the PE is always high. Is up 6.5% this year. Note: the under-40 membership has climbed 60% since Covid. Costco will face pressure from tariffs and higher prices. Like it a lot, but don't rush into it now.

Still fairly pricey, around 40x PE. 

See his Top Picks for a less expensive option.

They report Thursday. The stock is acting poorly. They have troubles getting younger people to sign up for memberships, because the young prefer shopping online.

Fantastic company, but still very expensive. Consistent, well-managed. Expectations for growth are about 10%, which doesn't entitle you to a 45x PE in his world. It's done well and good for them, but he can't get involved.

World's third-largest retailer. High traffic, repeat business, superior same-store sales growth in high single digits. Likes the recurring membership fees, with ~92% retention rate. Likes the procurement clout and narrow assortment of goods. Pretty good gross margins of 11%, and ~30% ROE. 

Seems to trade at a high multiple, and this scares people. But it's compounded at 17-18% since the IPO in 1985. Any day that ends in "y" is a good day to buy. Yield is 0.64%.

You have to be get used to paying a PE for this, like Walmart (which he prefers). A $50 drop off $1,100 is meaningless, since it has more room to run. 

Has traded at a high valuation pretty much since it went public. Good luck trying to pick a perfect valuation entry point. He invests in companies that can invest cashflows at high rates of return over decades. Stealing market share from low- and middle-end grocery stores. Adding services, such as Medicare plans in the US. Same-store sales growth 7-8% a year.

Deserves to trade at a high multiple because of business durability over the long term. Yield is 0.60%.

A better growth name than ATD. Take a look.

It's one of the best business on Earth. Customers and employees love Costco. They are opening new stores, so there's ample runway. However, the PE of around 44x is high. Same-store sales growth has slowed slightly. But it's good to hold long term.

It got too expensive, and now trades at 46x PE. If it falls to 45x expects a major move higher. Has long owned this.

He sold it last October at $1015. The chart began to break down. 

Inflation is really hard out there. Real pressure to save money, and this name is among the low-cost providers. Sees it continuing to do well, despite a difficult environment for so many people.

High valuation but is growing double digits, which it should do so for years. They have the lowest prices of products compared to peers. A lot of room to expand location. A great business model. He will hold this forever.

Buy some now at 47x PE, then more at 45x. Likes it. Is up 13% this year