Sep
14
Costco (COST) – Buy
September 14, 2007 | 2 Comments
(A reader asked for my opinion on Costco (COST), and I give it thumbs up.)
The retail sector is a worry for sure: the high interest rates and the declining real estate prices are preventing people from taking a home equity lines to pay off the credit cards and buy more stuff. Also, the gas prices are making people spend more money on gas; money they would have used to buy stuff. But I trust the American Consumer – yes, the one that just loves to keep buying stuff whether they need it or not. And you know what? As the World continues to become more global, and income disparities flatten around the globe, the rest of the people will learn how to be just like the American Consumers: great consumers. Some things don’t change, they are human nature, and the desire to acquire more and at a great value is one of them. Just as the desire to eat fast and tasty – and my success with McDonalds (MCD) when it was at $13 a few years back due to a low-carb diet fashion.
I do like the retail sector… I just think you have to get great companies so that when it comes back into the action you are well positioned. And Costo (COST) is a great, growing retailer in the US and in Canada (I just wish they had stores in other, growing countries/economies). I also like Walmart/Sams (WMT), which will benefit from growth in other countries, although it disappointed me with the earnings last quarter.
| Indicator | Value | My Take |
| PEG | 1.87 | Good |
| Industry/Sector PEG | 1.25/1.46 | Bad, Industry is Better |
| EPS Estimates trend | Down | Bad |
| Dividend Yield | Good | |
| Yearly Growth Estimate Next 5 Years | 12.61% | Good |
| Long Term Debt | 215,369,000 (decreased from 710,675,000 last year) |
Good |
| Insider Activity (last 6 mo) | 18.1% of shares sold | Bad |
| Institutional Change (to last Qtr) | -4.4% | Bad |
I would buy it. Right now I have good companies for the long term, but if I was looking for a company to buy this may be one of them. Even in for short term trading I would buy it. It is at about 60… short of its all time high of 65 or so, and climbing back.
The company is highly regarded, and I think that is why the premium vs the industry (high PEG, but still within limits). However, I see value in having a competent management team, and the extra premium could be worth it for the added reassurance that they have a management team that knows how to execute consistently, and knows how to meet the estimates.
Would you like my opinion on another stock? I would love to give you my opinion on the stocks you request, and I would love to hear your opinion as well. It is a good exercise that could benefit the both of us. Leave a comment.
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How about DUK, GE, MO?
I would love to hear your analysis of thes high yielders…
“The retail sector is a worry for sure: the high interest rates and the declining real estate prices are preventing people from taking a home equity lines to pay off the credit cards and buy more stuff.”
Folks with Home Equity Lines of Credit (HELOCs) are less likely to worry about declining Real Estate prices:
More and more folks are using a Home Equity Line of Credit (HELOC) as an interest cancellation account to accelerate their home equity and payoff their home *years* sooner than listed on their mortgage amortization schedule.
Unfortunately, today’s Real Estate market means that folks can no longer count on appreciation to build home equity. Those who realize that they need to pay down their current mortgage debt are looking for alternate ways to aggressively (yet safely) build equity.
And they’ve discovered a perfect online system to do that; they can focus on their wealth accumulation goals while accelerating their equity simply by using a Home Equity Line of Credit to ‘power’ the Money Merge Account™ financial solutions program.
A typical 30 year loan (of whatever type) can be paid down in 1/3 to 1/2 the time — it’s a great way to save *huge* amounts of income by eliminating a mortgage amortization front-end interest load. (On a million-plus dollar home, I’ve personally seen where the Money Merge Account™ program will save the homeowner $750,000 in interest charges!)
And the best thing – homeowners don’t have to refinance their existing mortgage or, in most cases, make any adjustments to their lifestyle.
It is unfortunate that most of us were never taught to follow three essential principles: (1) Avoid paying interest, whenever possible, (2) Use other people’s money, whenever possible and (3) Find and use a financial system that will guide you, especially if you have the tendency to go off-track. The Money Merge Account™ software and the program’s counselors use these principles to keep each homeowner focused on their wealth accumulation goals.
I’d be happy to provide further details…