Costco (COST -1.08%) was founded in 1983 by Jim Sinegal and Jeffrey Brotman. However, its roots go back to 1976, when Sol Price opened the first Price Club in San Diego. Price Club was a pioneering warehouse club concept, initially targeting small businesses. Sol Price, inspired by his previous experience with FedMart, a member-only discount store, opened the first Price Club in San Diego. This marked the beginning of the warehouse club concept, selling bulk items at discounted prices to small business members.
Jim Sinegal and Jeffrey Brotman, who had worked with Sol Price at FedMart and Price Club, decided to launch their own warehouse club, Costco Wholesale, in Seattle. In 1993, Price Club and Costco Wholesale merged, becoming PriceCostco, which later changed its name to Costco Wholesale Corporation. Today, Costco's core business model is based on charging an annual membership fee for access to its warehouse stores and online platform. This fee is the significant driver of the company’s consistent profitability.
NASDAQ: COST
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Costco sells a wide variety of products, including groceries, electronics, and household items, often at discounted prices. While it generates revenue from merchandise sales, it prioritizes low prices and high volume, resulting in smaller profit margins on each item. Costco's ability to purchase large quantities of goods allows it to negotiate lower prices with suppliers, which it then passes on to its members. This helps them attract customers and keep membership fees competitive.
Costco's pricing strategy is focused on offering the lowest possible prices, even if it means accepting lower profit margins on individual items. This attracts customers and encourages them to buy in bulk, increasing sales volume. Costco enjoys high customer loyalty, with a membership renewal rate of around 90%, indicating that many members find the value of the membership to be worth the cost. This loyalty contributes to stable membership revenue and helps drive sales volume.
Who is the owner of Costco?
Costco is a publicly traded company that is not owned by a single person or entity. It is owned by its shareholders, including a mix of institutional and retail investors. A large portion of Costco's stock is held by institutional investors, such as mutual funds, pension funds, and investment companies. These institutions often manage large amounts of assets on behalf of others.
Shareholder
Institutional investors
The top five largest institutional shareholders of Costco are as follows:
- Vanguard Group Inc.: The Vanguard Group is a leading global asset management company that primarily offers investment management and advisory services to individuals, institutions, and financial professionals. It is known for a broad range of investment products, including mutual funds and exchange-traded funds (ETFs), and its focus on providing low-cost, high-quality investments. The Vanguard Group controls a 9.5% stake in Costco, or 42.2 million shares, a stake worth about $41.97 billion.
- BlackRock Inc. (BLK +1.03%): BlackRock is a global asset management company and a fiduciary to its clients, offering a wide range of investment solutions and risk management services. It manages assets on behalf of various institutions and individuals, including pensions, educational organizations, insurance companies, and governments. BlackRock's services encompass investment management, advisory, and risk management. The company owns 34.76 million shares of Costco, a 7.83% stake in the business valued at $34.57 billion.
- State Street Corporation (STT +1.32%): State Street is a global financial services company with a primary focus on serving institutional investors. It provides a range of services, including investment management, investment servicing, and markets and financing. State Street is a leader in custody, fund administration, and other related services for institutional investors, including asset managers, asset owners, and insurance companies. The company owns a 4.08% stake in Costco, or 18.09 million shares. Its stake is valued at approximately $17.99 billion.
- Geode Capital Management, LLC: Geode Capital Management is a global systematic investment manager that provides institutional investors with a variety of investment solutions. It focuses on designing and implementing core beta exposures across a range of equity and niche asset classes, leveraging technology and a disciplined, repeatable investment process to manage assets and deliver risk-adjusted performance. The firm controls a 2.2% stake in Costco, or 9.74 million shares, a stake worth about $9.69 billion.
- Morgan Stanley (MS +2.86%) Morgan Stanley is a large global financial services firm that offers a wide range of services to help clients raise, manage, and distribute capital. Key services include advising companies on major financial transactions, including mergers, acquisitions, initial public offerings (IPOs), and debt offerings, and facilitating the buying and selling of securities for institutional clients, including hedge funds and other large investors. Morgan Stanley manages assets for institutions and individuals, offering a range of investment strategies across various asset classes. The company owns a 2.16% stake in Costco, or 9.57 million shares, valued at $9.52 billion.
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How to invest in Costco
If you want to buy stock in Costco, it only takes a few moments to do so. You can easily buy shares through your brokerage account. If you don’t have one open yet, opening a brokerage account online takes just a few minutes through most major financial institutions. You'll need to provide a few pieces of information, like your name, email, address, date of birth, and Social Security number.
When choosing a brokerage account, you can consider your financial goals, risk tolerance, and the types of investments you want to make. You will want to compare fees, commissions, and trading platforms. You should also consider your investment options on a given platform and the quality of the customer service that the brokerage provides. Once you open the account, you'll need to fund it to start trading.
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Consider your investment goals and how much of your portfolio you want to allocate to shares of the stock. Diversifying your investment capital across quality stocks, whether food stocks, consumer discretionary stocks, or otherwise, that represent numerous industries, can help you ensure you aren’t overly concentrated while enabling you to benefit from numerous sources of growth in a wide range of markets. Take time to look through investor presentations and study the company’s financials, risks, competitive advantage, revenue/profit model, and other key elements of Costco’s business before you put your money to work.
Decide whether you want to place a market order or a limit order for Costco stock. A market order means you buy stock at the current price. A limit order means you buy at a specified price. Your final step is to place an order once you've decided to invest your money. You'll need to enter the stock ticker for Costco, COST. Then, you'll indicate either the number of shares you're buying or the dollar value you want to buy before you press the buy button.
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