Costco's Jim Sinegal on Trader Joe's and the Only 2 Stocks He Owns

Jim Sinegal spent his career building one of the most successful retailers in the U.S.: Costco. Founder, chairman, and former longtime CEO, Sinegal turned Costco into a $39 billion chain of stores notable for their high levels of customer loyalty.

Last month, The Motley Fool’s own founder and CEO, Tom Gardner, ventured to a Costco warehouse in Florida for an interview with Sinegal. In the clip below, Sinegal talks about the only two stocks he owns, and why he thinks Trader Joe’s is a model of how to build a retail franchise. (A transcript is provided below; running time: 2:11.)

Tom Gardner: I don’t know if you’re a stock investor, but if you are not spending time investing in other stocks, let me put you in that position and ask you, what few things would you look for if you were out there looking to make an investment? Let’s say outside of the category of retail. If you’re just looking at businesses in technology and health care and finance, what qualities or what factors would you look for to put the Sinegal Fund Inc. capital into that business?

Jim Sinegal: Well the only stocks that I own are Costco and Berkshire Hathaway, so maybe that’ll tell you something.

Gardner: Yeah.

Sinegal: I don’t invest in the stock market. I have real estate holdings, but I don’t invest in the stock market.

Gardner: But when you look at...

Sinegal: But if I were to look at it, I mean I made the obvious choice of Berkshire Hathaway because of performance and because of the caliber and the quality of the management, and the integrity that the management represents, so I think you would look for exactly those types of things. You want to know that you’re getting involved with a company that is leveling with you and telling you the full story and that their performance is just not some fly-by-night type of aberration, but that they really are a solid organization.

Gardner: So I’m going to continue to simulate hypotheticals, which can always make us uncomfortable, and if you’d like to choose to pass on any of these questions, feel free to.  Now imagine that you’re investing in a small kind of up-and-coming retailer.  What might you look for to say, "Those guys, they’re doing it right. They may only be in one region right now of the country, and they may be a small cap with only $75 million on their balance sheet, but I like what I see because I see this about them as a retailer."

Sinegal: I would look for the types of qualities that you see in a Trader Joe’s.  That you’ve got a niche, that you’ve got quality products, you’ve got a quality organization, everything about that seems to suggest quality, including the people that they hire in their stores, and so it’s pretty easy to get turned on by a business like that.

Gardner: Yeah.

Sinegal: So I think I would look for those same types of qualities.

For more of Tom's conversation with Jim Sinegal:

The Motley Fool owns shares of Berkshire Hathaway and Costco Wholesale. Motley Fool newsletter services recommend Berkshire Hathaway and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (10)

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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 July 28, 2012, at 12:40 PM, glowgreen wrote:

    Too bad Trader Joe's is a privately held company. I would love to invest in them.

  • Report this Comment On August 09, 2012, at 12:35 AM, jettyman wrote:

    I was once a member of Costco, until I realized that management was injecting its leftist political view into club publications. I quit and went to SamsClub, which has a less expensive membership and essentially the same merchandise, perhaps better.

  • Report this Comment On August 10, 2012, at 1:15 PM, GrussGott wrote:

    That's why he's comfortable owning BRK-A.

  • Report this Comment On August 10, 2012, at 5:47 PM, davec22 wrote:

    Straight forward, basic advice from Sinegal. FWIW, I am a long time Costco member and owner of their stock which has done very well for me.

    For Tom Gardner -- The hokey music in the background is a real distraction. Video interviews should hardly ever use background music. It contributes nothing

  • Report this Comment On August 11, 2012, at 8:01 PM, contraryjim wrote:

    Both Traders and Costco pander to the "organic" and "sustainable" crowd. One can hardly buy real food at Trader's now.

  • Report this Comment On August 11, 2012, at 9:36 PM, celestebrunner wrote:

    Yes, Costco is very liberal and I am very conservative but I continue to buy there because I do like the *organic* things they offer.

    Their newsletter has to be read with my BS filter firmly attached as it, too, gets too liberal for me.

    I wonder if Mr. Sinegal is still as bullish on BHO as he was four loooong years ago.

  • Report this Comment On August 17, 2012, at 2:30 PM, captivabeach wrote:

    Beware of Costco. Costco really screwed me on a computer purchase. I tried to leave a low score about the computer and the service on Costco's website. I followed all Costco rules in doing so. I learned a dirty little Costco secret. Costco only publishes the glowing reviews about its products, not the negative ones. Do not trust Costco.

  • Report this Comment On August 31, 2012, at 3:49 AM, drsfooltool wrote:

    @captivabeach... ever heard of reputation.com?

  • Report this Comment On September 21, 2012, at 5:53 PM, SavvyInvestor33 wrote:

    I love Jim Sinegal's Costco and Warren Buffett's Berkshire Hathaway for the very same reasons that these above "Conservative" Lunatics do not like them.

    I am Savvy and Street Smart, and Love Value when I see it. I have zero tolerance for stupidity and rip offs!

  • Report this Comment On March 14, 2013, at 1:22 AM, DRB49 wrote:

    Jettyman's suggestion to switch to SamsCo is a good idea for anyone that thinks wallmart is some kind of positive business model. Poor selection, cheapest products and disregard of employee benenefits are their hallmark.

    I'll stay with Costco, my nose likes my face just fine.

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