Investing is never easy. That’s especially true in turbulent markets like right now.
This type of market environment makes it even harder to decide when to buy or sell…
For example, a business might be tailor-made for tough times. And yet, with many folks fearful of what’s going on, its stock could still get swept up in a broader market sell-off.
When that happens, you might ask yourself, “What should I do about this stock?”
I’ll explain how to handle this situation with Costco Wholesale (COST) today. In short…
I’m dodging the question.
Now, you might not like that answer. But in many cases, it’s the most powerful answer an investor can give.
And as you’ll see, it can be the first step in finding a much better opportunity…
Last week, Costco reported a 10.1% year-to-year gain in same-store sales. Without gasoline (we all know how those prices soared), the gain still would’ve been 8.7%.
That’s pretty good – especially with many retailers reporting sales declines these days.
And frankly, the Power Gauge’s current breakdown of its 20 different factors for Costco is pretty solid as well. It’s high enough to justify a “bullish” or “very bullish” overall ranking.
However, as we’ve seen with a lot of stocks this year, Costco’s share price recently slid below its long-term trend. As a result, it’s currently ranked “neutral+.”
So that brought me to the big question… “What should I do about Costco?“
I first looked for reasons to buy…
I’ve been a Costco member and regular shopper for years. I love the place. And I know many other folks do, too…
Buying in bulk at attractive prices is an obvious plus. And people can’t get enough of the famously cheap but surprisingly edible hot dogs and pizza in the snack area, either.
In some cases, stocks with “neutral+” ratings can present great buying opportunities if the Power Gauge’s breakdown looks good. However, you don’t need to play a guessing game…
Even though I love Costco (and the Power Gauge does, too), its stock is having an up-and-down year. So in the end, I followed my golden rule… When in doubt, do without.
In other words, I dodged the original question.
Dodging a question – and avoiding low-confidence answers – can help investors steer clear of bad outcomes. And even better, rephrasing the question can help us grab control…
“Can any stocks give me what I like about Costco while sparing me the negatives?“
The answer is a definitive “yes!” when it comes to competitor BJ’s Wholesale Club (BJ)…
BJ’s and Costco offer similar warehouse-club shopping experiences. The main difference is that BJ’s is regional (mostly in the eastern U.S.), while Costco is global…
BJ’s only operates 245 locations. And its westernmost store is in the panhandle of Florida. Meanwhile, Costco currently has 838 stores. And 260 of them are outside the U.S.
But importantly, unlike Costco, the Power Gauge ranks BJ’s as “bullish” overall today…
The recent market sell-off didn’t force BJ’s stock below its long-term trend. Even better, the Power Gauge is “bullish” or better in three of its four main factor categories.
Digging deeper, we can see that BJ’s is beating Costco on the fundamentals side, too…
Its price-to-sales ratio is around 0.5 (compared to Costco’s roughly 1.1). And its projected price-to-earnings ratio is about 20.6 (compared to Costco’s roughly 41.5).
The Power Gauge made it easy…
I love Costco. But I don’t need to buy its stock. If I simply want exposure to a membership-only retailer just like it, the Power Gauge helps us see the “bullish” opportunity in BJ’s.
So as you can see, dodging and rephrasing the question is often the best move to make.
Good investing,
Marc Gerstein
