Costco Wholesale Corporation (COST)

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.

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.