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☕ Costco – buy, sell or hold?

Jul 11, 2024

Good morning! 👋

And we’re off...

The CPI report came in as expected showing lower inflation which, you guessed it, means that the Fed may have more of an impetus to cut rates.

Traders wasted no time getting on the gas.

Thing is ...

We’ve been on the gas.

And, if you’ve been reading along for any length of time, you should be grinning ear to ear right about now. Especially if you’re investing in many of the great names we talk about constantly.

The S&P 500 closed above 5600 yesterday for the first time in history, marking the 7th straight day of gains if memory serves and I’ve had enough coffee. The snazzy Nazzy – Nasdaq – also hit a new all-time high.

My point?

You can have results or excuses, not both.

It really is that simple.

Here’s my playbook.

1 – Inflation falls 0.1%, WWJPD?

The consumer price index – a.k.a. the CPI – which is a broad measure for goods and services costs across the US economy - declined 0.1% from May. This puts the 12-month inflationary rate at 3% percent, approximately the lowest level in three years. (Read)

Here's the problem.

When you take food and energy costs out of the equation, the so-called core CPI increased 0.1% monthly and 3.3% from a year ago compared to forecast for 0.2% and 3.4% according to the Ministry of Whitewash.

Worrying about WWJPD (What Will J Pow Do) is a waste of your time.

Keith’s Investing Tip: The best course of action is to stick to those companies making “must have” products and services the world can’t live without. Better yet, those with strong protectable margins and the ability to influence consumer behavior for decades. It's a short list.

2 – Pfizer’s weight loss ambitions

Pfizer is apparently moving forward with a 1X daily weight loss pill after encouraging early-stage study data. (Read)

Good.

It's one of several potential obesity related treatments in the works.

What intrigues me with Pfizer specifically even though Eli Lilly and Novo Nordisk dominate the headlines at the moment is that Pfizer is very focused on oral treatments that are potentially far easier, more convenient, and potentially one heckuva lot more profitable.

Meanwhile, I’m loving the dividend.

3 – Pass (on) the Pepsi

Pepsi used to be one of those companies that you could count on through thick and thin.

Now, I’m not so sure.

Pepsi reported mixed Q2 results that were dampened by declining US demand for drinks and snacks. (Read)

It’d be easy to chalk this up to inflation, but I am not so sure that’s the entire story.

The bigger picture is a dawning awareness that much of what we eat combined with the desire for dessert first and dinner in a pill is killing us. That doesn’t strike me as a great operating environment.

Hmmm.

And yes, Coke will find itself facing the same challenges imho.

4 – Costco will now cost more

People ask me frequently if COST is too expensive or they’ve missed the boat.

No.

I’ll prove it to you.

Take out your wallet ... I’ll wait.

Got it?

Now look at it and ask yourself if your money goes as far as it used to?

Mine doesn’t.

The inflation data out this morning shows yet again that prices aren’t coming down anytime soon like people expect. My breakfast costs 80%+ more than it did a few years ago. Medicine, insurance... it’s all higher and still going up.

Raising membership fees will boost revenue and be a smart move that’ll pay off for smarter investors. (Read)

MyPOV: If you’re not buying a stock like COST, why not? And if you want to make sure you don’t miss the next big move, I’ll be here.

Invest in the best, ignore the rest: Not that it matters but just so you know what a difference owning a stock like COST can make in your portfolio over time... I brought Costco to OBAers in August 2021; since then, it’s returned 105.13% versus the SPY – a popular ETF choice – which has turned in a super healthy but far lower 31.47% over the same time period. Every $1,000 invested in COST back then is now worth $2,051.30. Every dollar invested in the SPY back then is now worth $1,314.70.

To be clear, I am NOT telling you this to brag. My point is that the way to beat the market is to buy stocks that actually beat it. I could easily have been wrong.