Costco Wholesale Corporation (COST)

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.

A great operator and great for consumers. It has been outperforming in terms of same-store sales against its peers. Trading at a very high multiple. Before she got interested she would want to see a bit of a pullback. Too expensive for her.

When you look at this and how they are different from some of their competitors, they are the low-priced leader. This is a high turnover model in terms of things sitting on their shelves, so they discount them compared to their competitors. When you own a name like this and things slow down, because their pricing is so aggressive they don’t have much of a buffer to cut prices. That can put significant pressure on the stock price. The recent drop in the stock price, he feels, is because of profit taking. This is rich on a valuation basis, and the dividend yield is not worth paying that premium.

One of the best retailing franchises globally. The only problem with the story is on a valuation basis. It always trades at a premium multiple. Trading at about 28X this year’s earnings.

Great company and they run fabulous operations. However, consumer spending in the US has not been what people have been expecting. Retail stocks have all been stellar performers, but in anticipation of the consumer spending that hasn’t come. In the near term this is probably vulnerable, along with other retailers, to a correction.

An interesting business. They actually carry much less items for sale than other grocery stores or retailers. It targets a particular market, which tends to range on the higher end of household income. As a result, they are able to price their items a little more aggressively in some areas. However, when you aggregate everything together, their prices are actually lower. Valuation is very high, but it is a very good business.

This is still a good growth story. They continue to expand and are going to go more global. Have a great business model. Another advantage they have is with the strong US$, which is impacting negatively a lot of exporting companies. But as a buyer of international goods, those costs are coming down. Valuation of US retailers is quite high right now. Trading at almost 29X estimated earnings.

The company has done a wonderful job. He likes the model. They are in a low margin business, but they have the membership fees, which is pure gravy. A nice recurring revenue. However, the multiple is quite high, which has made him shy away. He doesn’t think you can build in any multiple expansion, so it is going to have to be on internal or organic growth.

One of the best retailing operators, probably that ever existed. The stock is premium priced, trading at about 28X earnings and growing at about 11%. It doesn’t fit with his mold. He would wait for big drops in the stock because of a stumble or short-term blunder.

Their business model is somewhat unique in that they are the low cost leaders. The downside of that is that margins are half of their competitors. If the economy starts to slow down, this company doesn’t have the ability to cut prices to move inventory. The only way you can run a model with low margins, is to be moving a lot of units. If we are expecting an economic slowdown, this company will not have the ability to cut prices. Opened about 30 stores last year and are projecting to do the same this year. These store openings will have a little bit of weight on their expenditures, so some of their cash will be used there. Until these are done, there won’t be any major uptick.