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☕ Buy Costco? Disney?

May 30, 2024

Good morning! 👋

It’s another day in the red as we get going.

Excellent!

I know that’s not a word many people would use to describe what’s happening.

Here’s why I do.

Buying and selling attracts money – liquidity to use a $5 word - like popsicles attract kids on a hot summer day. That means you can get in and out of stocks more easily which, in turn, helps you seize opportunity and manage risk more effectively.

The “best companies” rise to the top whenever the deck gets shuffled because they are capable of strong performance over time even though the markets themselves seem weak at moments in time.

That’s why, at the risk of sounding like a broken record, you want to constantly invest in optimism rather than cower in pessimism.

Your money will thank you.

Simple tactics like LowBall Orders and Selling Cash Secured Puts can be devastatingly effective whenever the markets pitch a fit.

Here’s my playbook.

1 – Why the selling doesn’t bother me, plus Nvidia

The fabulous Tyler Mathisen and Kelly Evans kindly invited me back to CNBC’s Power Lunch yesterday for a fun, wide-ranging discussion I think you’ll find valuable. (Watch)

2 – I’ll be flabbergasted if Costco doesn’t knock it outta the park

Costco reports later today and I will be simply gob-fobbed if the company doesn’t come in strong. (Listen to the call)

In fact, I’ll bet they biggy-size earnings.

I’m expecting same store sales growth of 5-7% but the real key in my mind will be online growth which may come in north of 12%. Digital sales, which is different, could top 20%.

Shares have dramatically outperformed the S&P 500 for quite some time which is why, perhaps, not surprisingly it’s one of my faves. Over the past 12 months, for example, COST has turned in 65.08% while the SPY, a popular ETF indexers choice, has cranked out 26.66% according to Koyfin.

OBAers are grinning ear to ear and, I’ve heard from some, have just had the opportunity to capture another FreeTrade – a pro-grade tactic I advocate whenever shares have appreciated 100% or more.

If you’ve got this covered, that’s fabulous; most investors haven’t got a clue. And if you’d like to learn more about how to line up stuff like this, I’d be honored.

At the other end of the spectrum...

3 – Kohl's reminds me of Sears

Not for trying, but this company can’t get out of its own way.

Management just posted a quarterly loss that missed estimates by a country mile while also lowering its full year forecast. Net sales dropped –5.3% and net guidance now reflects negative 2-4%. (Read)

My guess is that Kohl’s doesn’t exist much longer.

Reminds me of Sears.

Putskies.

I can see $10 a share a year from now without much imagination.

Keith’s Investing Tip: Sometimes you don’t even need to look at the numbers.

Case in point, Kohl’s strategy according to the company’s website is “focused on long-term shareholder value” and its priorities are “enhancing the customer experience, accelerating and simplifying value strategies.” Talk about Buzzword Bingo. 🤦‍♂️

Costco’s is super specific... and I’m paraphrasing here... we sell schtuff at low prices intended to produce high sales volumes, rapid inventory turnover and big honking margins.

No doubt you see my point.

4 – ConocoPhillips “me, too”

ConocoPhillips is buying Marathon Oil for $17B in an all-stock transaction that will give the company much broader access to shale fields in Texas, New Mexico and North Dakota while adding an estimated 2B barrels to inventory.

As great as this sounds, I’d rather own another choice with bigger reserves, a global presence, and what I consider to be the best alternative energy portfolio on the planet. Plus, it’s got a better dividend and significantly higher shareholder yield. (Upgrade to paid)

5 – Buy Disney?

Activist investor Nelson Peltz has picked up his toys and left the sandbox after a resounding trouncing at Disney where he had tried to get himself and former Disney CFO Jay Rasulo on the board. (Read)

Don't feel bad for the guy.

Reports suggest he pocketed $1B for his troubles... but, strangely enough, not a peep about how much money he cost individual investors who got caught in the middle.

MyPOV: That's the problem with activist investing. Many want you to believe they are acting in your interests but, more often than not, they’re corporate raiders with an agenda. And, I don’t want to be anywhere near ‘em which is why I will typically give any company being targeted a wide berth unless there is something super compelling and super specific that I’m after.