Costco Wholesale Corporation (COST)

You want to be selling retail at the Thanksgiving holiday. There can be a bit of positive in December, and this one probably has a bit more life than the retail sector itself. It doesn’t have the tendency to fall off like the broader retail sector does. He would continue to Hold. Looking at the technicals, there is reason to be optimistic. You could see higher prices from here.

A great company. Long-term track record of great returns. Very consistent. However, the stock has run up and it is just starting to turn over a little. He would like to own this company, but at a lower price, and thinks he will get that opportunity.

The metric he likes most when it comes to evaluating stocks is the free cash flow yield, and this company has a tremendous one. He doesn’t own it because they don’t pay a very good dividend. Prefers Walmart (WMT-N) which has a free cash flow yield of almost 10%, and a dividend yield of about 3%. If you want to own a stock for appreciation, and not collect the dividend, Costco would work.

It is a hit on all cylinders. It is a cult. It trades at 1.5 times what the market normally trades at. There was some slippage in same store sales growth. They are over building concerns. The model is to make no money on goods and all of it on membership. He would pass given the valuation.

We are in the period of seasonal strength right now, so continue to hold if you own it. Retail stocks like this have very precise timing for when you want to take your profits. They do very well until Black Friday, the last week in November. After that you want to take profits.

An excellent executor of the business model. Sold his holdings mid-summer. This has a seasonality, and the whole space has some pretty big weakness in August. He would probably look to buy this back in November. If you can get it at around $135, you are probably getting a pretty good price.

He is not a fan of bricks and mortar retailers, but this company has a great brand and has demonstrated excellent long-term growth. His concern is the valuation. The free cash flow yield approximates 3% and it trades north of 20X earnings. He would be more compelled to Buy if it pulled back by 15%. A very defensible business, as two thirds of the revenues really accrue from the memberships they sell.

It has been going sideways for a year. It came down quite a bit recently. The long term support is at $140 going back about 2 years. If we trade below it, you have a potentially major top. We were not able to take out the previous high recently. Don’t touch it. It is not acting well.

(Market Call Minute.) This always tends to trade at a premium to the market, high multiple. Valuation is just too rich to buy it.

There is a difference between a great stock and a great business. This one is a great business, probably one of the best in the world. That tends to result in a high priced stock. The long-term chart tells you that you are going to be fine. There is still lots of room for them to grow.

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%+.