Costco Wholesale Corporation (COST)

A phenomenal company. The beauty is that they don’t make a ton of money selling their stuff, they make their money selling their membership, and have a very small markup on items. He wants to buy this at a cheaper price. If you are looking at holding this for the long, long term, he would say go for it.

(Market Call Minute.) Loves the company and loves the model, but a little too expensive.

(Market Call Minute.) A wonderful, wonderful business. He missed buying this at $130, and if you get that opportunity, buy it.

It has always been at a premium. They are a low priced leader and margins are at half the peer group. 25% of revenues are from fees from memberships and 90% of fees are from renewals of memberships. They have a dividend of 1% but he has not stepped in because the valuation is too rich.

This is on his radar screen. They have an excellent business model. The majority of their revenues and profits come from the memberships they sell. Margins are relatively low. The type of stock you could put in your portfolio and not look at for years. Dividend yield of 1%+.

It is a cross between consumer discretionary and pure retail. He has a tight stop on it. They have protected their margins and have decided to expand internationally.

(Market Call Minute.) They do good things, but just too expensive.

Expects this is a good company and probably a good, long term investment. Overall, retail has been under assault. Amazon (AMZN-Q) has really impacted the whole retail space. The discount big box stores in general fit very nicely with what he thinks is happening. Not a bad place to be.

A great business, but she is more neutral on the name. As much as it is a good business, it is suffering from a bit of the same dynamic as retail sales across the US. Not sure where the incremental growth is going to come from. She would be looking for something with a more favourable risk/reward dynamic.

An exceptionally well-run company. One company he thinks that can continue to compete against Amazon (AMZN-Q). A great distribution network with loyal customers. It always trades at a huge valuation and always looks expensive, but always goes higher over time.

It has always been a very expensive company. It is rich at 27 times earnings, but it has come down from the low 30s. It is at its 200 day moving average so you might want to wait and make sure it does not come crashing through it.

Seasonality for this is through from early October until early January. Gas is a lot cheaper and the first thing customers do is buy their gasoline and then go into the store and do their shopping.

Retail is another area he really likes. Some of the discounters are really attractive. COST-Q is a strong stock within the group. It is likely to put up good numbers. Technically when you go through a correction like this, you should look for things you want to own. He looks for companies that bottom when the first low takes place but don’t retest it when the rest of the market does.

They have done very well and are on her watch list. They are highly valued because they execute well. They are great for the average consumer. It will probably hold up better in a downturn. They are more staple-driven. She is waiting for a pull back. It is a well run company.

The share price has been suffering. However, long term he expects they will continue to capture market share, especially with the economy improving. The issue is that the stock is trading at 26X forward PE, with an expected 10% long-term growth rate. This puts it at 2.6X Peg Ratio, which is rather high. There are some foreign exchange headwinds, as 30% of its revenues come from international markets. He would prefer the dollar stores at this time.