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Costco Outperforms The Market In A Weaker Economy

Dec. 04, 2021 4:24 AM ETCostco Wholesale Corporation (COST)20 Comments
George Dagnino profile picture
George Dagnino


  • Costco’s price pattern is closely related to the business cycle.
  • Costco outperforms the market when business slows down.
  • Costco will continue to outperform the market.

Big-Box Retailer Costco To Announce First Quarter Earnings

Scott Olson/Getty Images News

As discussed in my article of 12/15/2020 - Costco: A Great Defensive Play, The Issue Is Timing – Costco (NASDAQ:COST) has a distinct pattern closely tied to the business cycle.

Costco declined more than 19% from

This article was written by

George Dagnino profile picture
George Dagnino. Economist -- Investment strategist -- Portfolio manager – Author - Editor of THE PETERDAG PORTFOLIO STRATEGY AND MANAGEMENT on www.peterdag.com. Complimentary subscription is available.Nationally recognized speaker on business cycles George Dagnino, Ph.D. is the former Chief Economist and Risk Manager for a major corporation where he managed $4 billion of interest rates and currency hedge portfolios. The Economist Intelligence Unit (London) wrote an article about his unique and successful approach to managing risk (interest rates and currencies) using derivatives. Dr. Dagnino is 1989 market timer of the year (Source: Timer Digest) He is also the author of three books: *** "PROFITING IN BULL OR BEAR MARKETS," published by McGraw-Hill, available in Asia in several editions from McGraw-Hill Education. *** EASY WAYS TO BEAT THE MARKET WITH ETFs *** INVESTING WISELY, IT EASIER THAN YOU THINK He taught MBA courses business and portfolio management. He has a Ph.D. from Case Western Reserve, Cleveland, Ohio. He is also an internationally recognized speaker and lecturer to many AAII investment groups, hedge funds, Europe, and China.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of COST either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (20)

COST will cross 600$ soon..

It is an ideal stock to own during the upcoming stagflation. Here are 10 reasons to own COST for life -

(1) Kirkland alone is now a 60 Billion $ revenue - larger than Coke.
(2) 90% of the warehouses are wholly owned by Costco.
(3) EBIT to interest expense coverage is near 40 and debt is only 35% of capital
(4) Cash & Short-term Investments are more than outstanding debt
(5) Inventory turns = 12 per year
(6) Optimized stocking - only 4000 SKUs
(7) 60% of Operating Income is from membership fees
(8) Average household income of Costco customers - 100K pa
(9) Insulated from slowdown overseas - only 25% of sales are from abroad

(10) First to lower prices, Last to raise prices - gross margin of only 11% - record of flawless execution as it competes with AMZN, WMT, BJ and TGT

Long COST...
Briar profile picture
@Sleepless@FED I would add:
(11) Treats employees, members, and shareholders fairly.
@Sleepless@FED Great stuff I am long for a decade.. what do you mean by costco owns 90% of the warehouses? They own the land and building and are not renters?
@Briar great add!
I bought COST in late March because I thought it would be a good cash substitute at 338 a share. Plus is pays a little dividend. Needless to say it has exceeded my expectations. It is often the largest daily gainer in my portfolio. I cant imagine this will last when interest rates rise...
investor_newbie profile picture
@getrichslow Same here. It was a difficult decision especially after Buffett cleared his entire COST holding (it is the feeling of "close your eyes, and jump off the cliff, will you?"). The market never lacks opportunities. There is always a bull market somewhere. Also, COST opened its second store (yes, only the 2nd) in China. People lined up outside the store at 3am. Another sign of great progress and long runways.

Riverbum9 profile picture
I've been a Costco member for decades, love the store. But this stock is up 40% since May, and the chart is looking toppy and appears to be establishing a downtrend - lower highs and lower lows. Time to take profits IMO
Even at the height of the pandemic, Costco performed like a champ! But they may raise membership fees again! Longz COST! :-)
But would Costco shoppers pay 50x earnings?
Great management at COST, this company is a money making machine.
@Money 29 So lucky I bought this one along time ago. what a great company and place to shop!
@Money 29 and great employees too!
Is BJ a bad long term investment? Can BJ be a COST of tomorrow? Thanks
@kalu0003 People only belong to BJ if there is no Costco within driving distance or if they don't know any better.
check-mate profile picture
@ABBAfan plot the performance of bj vrs cost past year . Bj is doing very well

@ABBAfan i have never even seen a BJ's!
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