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4-Star Stocks Poised to Pop: Costco

By Brian D. Pacampara | More Articles
October 19, 2009 | Comments (8)

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Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, discount-warehouse retailer Costco Wholesale (Nasdaq: COST  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Costco's business and see what CAPS investors are saying about the stock right now.

Costco facts

Headquarters (Founded)

Issaquah, Wash. (1976)

Market Cap

$25.5 billion

Industry

Food and staples retailing

Trailing-12-Month Revenue

$71.42 billion

Management

Co-Founder/Chairman Jeffrey Brotman
Co-Founder/CEO James Sinegal

Return on Equity (Average, Past 3 Years)

12.7%

Cash/Debt

$3.73 billion/$2.3 billion

Dividend Yield

1.2%

Competitors

Wal-Mart Stores (NYSE: WMT  )
Target (NYSE: TGT  )
BJ's Wholesale (NYSE: BJ  )

CAPS Members Bullish on COST Also Bullish on

Apple (Nasdaq: AAPL  )

CAPS Members Bearish on COST Also Bearish on

Google (Nasdaq: GOOG  )
Amazon (Nasdaq: AMZN  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 96% of the 3,505 members who have rated Costco believe the stock will outperform the S&P 500 going forward. These bulls include tpc2104 and All-Star TMFActionJackson, who is ranked in the top 2% of our community.

In late August, tpc2104 listed several of Costco's cool points:

Strong management and balance sheet. Good sales. Great business model. Like others have said, low employee turnover, warehouses always packed with customers, new warehouses always opening. Decent dividend, which I suspect will only increase (versus stagnate) as Costco's business thrives.

In a pitch from last month, TMFActionJackson delivers a bull case directly from the top:

CEO Jim Senegal came to the Fool today and gave us some insight into his life long passion for retailing and how it manifests itself in running Costco. He is a humble leader who takes care of his employees better than anyone else in the industry. Their "treasure hunt" feel, smaller # of SKUs [stock-keeping units] per store and relationships with suppliers put them in a fierce competitive position. Inventory does not come on Costco's books until the item is actually sold. How's that for inventory turn?

What do you think about Costco, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Costco, Apple, and Amazon are Motley Fool Stock Advisor selections. Costco is also an Inside Value pick, as is Wal-Mart. Google is a recommendation of Rule Breakers. The Fool owns shares of Costco. The Fool's disclosure policy always gets a perfect score.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 19, 2009, at 9:49 AM, pondee619 wrote:

    Still refusing to keep track of your "poised to" stocks on CAPS, Brian?

  • Report this Comment On October 19, 2009, at 12:44 PM, jimlee36 wrote:

    I have 15k profit in COST as of today. I do not need the money--should I let it ride or SELL? Opinions, please.

    jimlee

  • Report this Comment On October 21, 2009, at 3:11 AM, 8Lives wrote:

    Do not sell COST. I gaurantee it continues upward. I'd be curious once it's at 70, for the immediate "trading" future, but Costco is "money" in a long-term sense.

  • Report this Comment On October 21, 2009, at 8:32 AM, pondee619 wrote:

    " I gaurantee"-- backed by what? you gonna pay off any losses from here on? i thought statements like this were reserved for a yahoo board.

  • Report this Comment On October 21, 2009, at 12:39 PM, jimlee36 wrote:

    8Lives--Thank you for your answer on COST--will HOLD

    What brings out people like "pondee619"?

  • Report this Comment On October 22, 2009, at 7:23 PM, steinbrock wrote:

    I own Costgo too but not with as large a profit as you. However, my gut feeling is to hold it and another reason would be high capital gain tax you would be paying unless you have taken some losses.

    Sillyjack

  • Report this Comment On October 29, 2009, at 3:12 PM, jimlee36 wrote:

    Thank you Sillyjack--will continue to HOLD COST. Have no concern on capital gain tax as stock is in self directed IRA.

  • Report this Comment On December 02, 2009, at 8:52 PM, 8Lives wrote:

    I tried to get my mother to buy is when it was at 48 but she was too busy I guess. I have friends who work at the warehouse and one at corporate. For years I've been told they conduct their business the right way all the way around, inside and out, and now the Fool is confirming.

    -cheers

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