Costco Wholesale Corporation (COST)

It is not a value stock. If you are a long term investor then it is still relatively immune from online shopping. It is an experience and will continue to be the case.

Would you get in at this level? He would get it, it’s a great company one of the most consistent he has seen. Earns 13-14% return on invested capital. You need to pay up for consistency. Stock has gone up, it’s not super cheap but it’s not out of the stratosphere just yet so you can still hold it.

(A Top Pick Aug 18/16. Up 5%.) Unloaded this. Doesn't like the consumer staples/consumers discretionary space to a certain degree.

(A Top Pick July 20/17. Up 5.53%.) Had picked this because it was vastly oversold, and still is. With the Amazon (AMZ-N) Whole Foods acquisition everybody panicked and sold everything that sounded retail. This company has its own formula, and will not be affected by Amazon as much as people thought. It is still a buying opportunity and could go much higher in the next year or so.

Covered call? This has some challenges because of Amazon (AMZN-Q). They were hit when Amazon announced their takeover of Whole Foods. He likes the company and thinks it is OK longer-term. If he were going into it, he would Buy it and Sell an At the Money Covered Call.

He bought it shortly after the announcement of AMZN-Q announcing the purchase of Whole Foods. It is only one of the few with positive same store sales. If they bring up their online shopping model the will compete quite well.

A great company. On his watch list. When he bought it, it was at the lower end of its valuation range. It is currently in the middle of the range. One of the few retailers that can generate really respectable same-store sales.

He doesn’t like the sector. A lot of the hit came from the Amazon acquisition of Whole Foods. This company probably has the most defensible business model of the group. Technically it broke down and is in a negative group for him, so he wouldn’t be there. There are a lot of headwinds coming.

Amazon acquisition of Whole Foods could change the landscape for all retailers, however, it hasn’t happened yet. The acquisition is years away and it has to get through regulation. In the meantime, this company is performing financially, and nothing has changed in their unique story. The drop in price is parabolic to the downside and this is a good entry point. (Analysts’ price target is $185.)

Thinks this is feeling the Amazon (AMZN-Q) affect. Every retailer known to man is at a 52-week low now. It doesn’t matter if you are the most successful retailer like this company or the crummiest one, you are just getting beaten up. There is not enough margin of safety in their evaluation for him to get excited. At 25X earnings, it is certainly a lot cheaper than it has been.

A wonderful retail story which has done really, really well. Like many retailers, this has come off with Amazon (AMZN-Q) taking over Whole Foods (WFM-Q). Not sure the people that shop at Whole Foods is the same demographics of those who shop at Costco, and feels this would be a buying opportunity.

Not a big fan of staples right now, however this one is a little different. It falls into a bond proxy sector. With higher yields, that should and has been harder on bond proxies like utilities, telecoms and staples. However, this one is different. Its model is the most defensible against something like an Amazon (AMZN-Q) incursion. Ultimately though, you are swimming against the tide in the sector. This is a good company and a bad stock.

Can this compete with Amazon (AMZN-Q)? If there is one name that can compete with them, it is this one. They are able to cross sell products. It is one of the few retailers that has done exceptionally well. Trading at around 28X PE, which is expensive, but continues to set new highs and go higher. Dividend yield of about 1.25%. A tough place to be if the stock goes sideways. About 25% of revenue comes from membership fees, which is a little bit of concern, because with 80 million members, how much more can they grow in this area.

The world’s 2^nd largest retailer by revenue, and operate over 700 stores and warehouses globally. They have 90 million member cardholders. He doesn’t believe the acquisition of Whole Foods by Amazon (AMZN-Q) will change the game that rapidly for this company. Renewal rates are 90% in North America and 88% outside of North America. They need to improve their online revenues which are still in single digits. Dividend yield of 1.3%. (Analysts’ price target is $185.37.)

Retailers in general have been pretty stressed. They continue to miss earnings, and are hurting because of Amazon (AMZN-Q). This one is not quite in the same category as they have a bit of a moat. They are the leader in the membership model of large packaging and deeper discounting. Trading at a pretty good valuation. Good ROE’s up 22%. OK on a PE basis. Thinks this will be one of the survivors.