Bulk Up on Costco Stock
Costco Wholesale Corp (NASDAQ: COST) has turned its bulk wholesale shopping model into a growth juggernaut. I have spent my career defining, refining, and identifying MegaTrends and the stocks that benefit from them. Those are long-term trends that are unfolding regardless of economic bumps and potholes. They extend out a decade or more.
One of those MegaTrends is the consumer. Obviously, the consumer is the engine of most economies, but technology has empowered the consumer in new and more pervasive ways. Technology now allows us to personalize almost everything – banking, investing, shopping, you name it. Our cars are smart and so are our refrigerators. One thing that is always a key to attracting the consumer is price, and that’s especially true now.
It’s All About the Price Now
As food and other goods get more expensive, buying bulk to save money becomes a real option. You don’t even have to be a member to get in on some of the deals. Both COST pharmacies and their liquor sections are usually open to everyone, not just card carrying members. You can also have someone buy you a Costco cash card, and you’re in.
Source: Motley Fool
COST is one of the largest US importers of wine, doing almost $1 billion in imports every year. It’s also the biggest pizzeria in the US. While the average supermarket sells about 40,000 items in North America, COST only carries about 4,000, but those 4,000 are strategic and not random.
The point is, COST has been doing this for a long time and knows it has customers that are local restaurants and caterers, large families, fraternity houses, sports teams, and all manner of groups that don’t have a problem buying in bulk regularly.
These shoppers are the steady business that retail stores crave, and because the store and shoppers are all focused on price, it makes for a match made in heaven. What’s more, it’s also well known that COST treats its workers as well as it treats its members, and that’s important when theft and waste can make the difference between profitability and losses.
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A Growing Global Footprint
As you can see below, COST has made inroads far beyond North America. As of 2021, it had just over 800 warehouses – almost 560 in the US, more than 100 in Canada, about 40 in Mexico, 30 in the UK, 27 in Japan, 17 in South Korea, 14 in Taiwan, 13 in Australia, 4 in Spain, 2 in France, and even one in Iceland! It also has one in mainland China, and this year plans to open warehouses in New Zealand and Sweden.
Source: Wikimedia Commons
Years ago, Walmart (NYSE: WMT) tried to spread its model around the world like some of the other global retailers (before the advent of e-commerce retail took hold), a1nd it ran into significant issues in almost every market it entered. COST has done what Walmart attempted to do a couple decades ago, and it has succeeded.
I pick my portfolio stocks using a tool I have built that I call my Trendsetter Strategy. I run it every week to see if my portfolio holdings remain the best stocks I can own, and if they’re not, which stocks I should replace them with.
Just recently, COST popped up on the list, and I added it to my Global Growth Portfolio. That doesn’t mean it’s a hot stock now. It means COST is going to be a hot stock for a long time to come. I mean, the stock is actually up nearly 4% in the past three, difficult months, and it’s up 47% in the past 12 months. There are few, quality, big-name stocks that are posting positive numbers in the past three months, especially retailers.
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