Just a short post on a recent stock purchase of Costco shares I made for my retirement account.
I only took a small position in this giant American based retailer but very happy I found the guts to do it as I've watched this stock run away from me for the last couple of years. It's already up 42% YTD.
During a recent visit to Kelowna we decided to do a Costco run. First problem was circling the parking lot for a spot as the place was rammed with cars and people after only being opened for an hour.
Once we went inside the foyer there was not a shopping cart to be found. Seriously? It's only just opened and all the carts are taken? Yup, more waiting. The checkout lines were the worst I've seen in any Costco I've shopped at.
We kept jostling ourselves through the massive crowd and tried to enjoy the experience but all I could think of and ask myself is "Why don't I own stock in this company?" I've thought of it many times in the past but always thought it was too expensive and or I didn't have the money.
Within 10 minutes of getting back home to unload the groceries I bought Costco. I also got lucky as the stock had just sold off on an earnings miss so to me it was on SALE!
A couple criteria I always use before I buy a company are; do I understand the business and do I use what they sell?
Yes, on both counts. Costco only marks up their products 15% and keeps it there so it's affordable. It only gives you one choice to ponder. You want mustard? no problem. It comes in a double pack of bottles and only one brand to choose from. Most supermarkets give you multiple choices so you linger in the aisle longer. NOT Costco - one choice take it or move on.
Their biggest income generator is selling memberships to shop at their stores. It's just a brilliant marketing plan and where Costco makes all their money. They also have the ability to raise these prices anytime they want.
Let's take a look at some of the numbers;
Market Cap: $99.7B
Beta: 1.1
Beta: 1.1
ROE: 26%
Forward P/E: 33.4
EPS Growth: 13.5%
Revenue: $144.5B, growth per share 5%
Debt: $6.5B
Forward Dividend: 1%
Payout Ratio 30%
Forward Dividend: 1%
Payout Ratio 30%
Price Paid: $217.88
52 week high: $245.16
Earnings and revenue are growing, low debt, low payout ratio and great return on equity. They do have a high p/e but it's always been expensive. I plan on holding Costco for the next 9 years when I have to collapse my RRSP and convert it to a RRIF. They operate 741 warehouse stores and growing.
This is a great company in the consumer staples space and more importantly I am a member and shop there regularly so why not own some shares as a hedge on my monthly fees?
How about that $1.50 hotdog?
NEVER GAMBLE WITH MONEY YOU HAVE SAVED FOR RETIREMENT!
If you are having trouble getting your financial house in order and organized then you need to read Worry Free Money.
If you are further looking for portfolio ideas then you might find my review of The 6-Pack Portfolio a way for you to get started on your investing journey. All of our retirement money is invested in this manner. We just hold more than 6 positions.
Earnings and revenue are growing, low debt, low payout ratio and great return on equity. They do have a high p/e but it's always been expensive. I plan on holding Costco for the next 9 years when I have to collapse my RRSP and convert it to a RRIF. They operate 741 warehouse stores and growing.
This is a great company in the consumer staples space and more importantly I am a member and shop there regularly so why not own some shares as a hedge on my monthly fees?
How about that $1.50 hotdog?
The members just can't get enough of those cheap dogs. The CEO has said they make no money on the special of a hotdog and pop for a $1.50. In fact he said he's trying to find ways to sell it cheaper. Now, this is a man who takes care of and treats his members like owners.
Just don't visit Costco on pension payday unless you've packed a lot of patience. The store is more packed than usual. This day usually falls two banking days before the end of the month.
Do you own shares in Costco and if not would you buy it?
NEVER GAMBLE WITH MONEY YOU HAVE SAVED FOR RETIREMENT!
Looking for Saving Ideas So You Can Invest?
If you are looking at ways to save money this new book The Cashflow Cookbook can help you find some savings to then use to invest.
If you are having trouble getting your financial house in order and organized then you need to read Worry Free Money.
If you are further looking for portfolio ideas then you might find my review of The 6-Pack Portfolio a way for you to get started on your investing journey. All of our retirement money is invested in this manner. We just hold more than 6 positions.
If you want to read more about the theory and methodology of some of Canada's professional investment/portfolio managers then you need to pick up a copy of the book 'Market Masters'. Robin Speziale conducts interviews with top money mangers in Canada using a set of pre-arranged questions. This will give you a real insight into how others invest money and how they think. A must read!
I never invest in the stock market, I like to buy quality companies and hold for the long term. Stocks become safer the longer you hold them. I believe Costco is one of those companies you should buy and hold. My opinion and not advice for you to do the same.
