Costco Wholesale Corporation (COST-Q)

The PE is high, they can add 20-30 stores a year for 20-30 years. A huge runway worldwide. They do all they can for employees and shareholders. One of the best businesses in the world.

The PE is high, they can add 20-30 stores a year for 20-30 years. A huge runway worldwide. They do all they can for employees and shareholders. One of the best businesses in the world.

The PE is high, they can add 20-30 stores a year for 20-30 years. A huge runway worldwide. They do all they can for employees and shareholders. One of the best businesses in the world.

Great operation. Steady membership and store buildout growth. Very expensive; 45-47x PE last time he checked. Too high of a bar for him as a value investor. Risks of supply chains, labour, inventory, tariffs. 

Great stock. Incredible compounder of shareholder value over 4 decades. Recurring revenue from memberships, narrow assortment, and sharp pricing. Always looks expensive, but any day that ends in "y" is a good day to buy.

Great company, a staple. Pullback lately. Membership renewal has been great, and she's watching that. Ranks 10/10 on fundamentals. She'd buy. Upside potential still 13-14% from here. 

In addition to the 200-day MA, he looks at peaks and troughs. Look at the last low and the last high. The next high hit the previous high, so that's two relatively similar peaks. The stock may be below the 200-day MA (1st rule to sell), but it hasn't dropped below the last trough (2nd rule to sell). As long as it holds above the last trough, you're safe. 

Don't go into full panic right now. Hold for now; if it breaks that second rule, then get out.

COST is a large consumer staples name, but it trades at a high valuation of 49X forward earnings. Recently, we have been seeing large-cap names, particularly more stable and defensive names, being sold for higher-growth stocks, which helps to explain why the consumer staples, utilities, and healthcare sectors have been underperforming recently. We continue to like COST for a long-term holding, despite its high valuation, given its subscription model, consistency and execution. It may underperform in a strong bull market, but over a long-period of time, it has performed exceptionally. 
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Growth is driven by steady cadence of new-store expansion. Good traffic. About 9% compounded rate of sales growth over the last decade. Earnings have grown ~13%. Always looks expensive compared to peers, but that reflects its enduring, sustainable competitive advantage. Any day that ends in "y" is a good day to buy. Yield is 0.52%.

Wonderful business, though not a good valuation (and that's the orange flag). PE ratio is in the 40s if not the 50s, lots of growth already priced in. Even 30x PE is probably a bit rich. Fantastic job increasing cashflow per share. If you own it, hold on (again, from Charlie Munger, "do not interrupt compounding unnecessarily").

It reports tomorrow. No matter how good the quarter will be, it will sell off as it always does after a quarter. Buy after the report.

Great company and franchise, but valuation got expensive.