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With shares of Costco Wholesale Corporation (NASDAQ:COST) trading at around $103.15, is COST an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
The following quiz ties into catalysts for the stock’s movement. This quiz will not be graded by anyone but you, so you’re on the honor system. If you ace it, then feel free to give yourself a pat on the back. Or, you can do a little dance…if you’re not sure what to dance to, go to YouTube and type in Rock Lobster by the B-52s. Okay, let’s get to it.
1. Does Costco have more warehouses than Wal-Mart Stores Inc.’s (NYSE:WMT) Sam’s Club?
2. Does Costco have higher total sales volume than Sam’s Club?
3. Was Costco the first company to grow from zero to $3 billion within six years?
4. Is Costco a Fortune 500 company?
5. Are cash, debit cards, and American Express (NYSE:AXP) the only forms of payment accepted at Costco?
6. Does Costco have A TON of cash?
7. Has Costco displayed consistent growth?
8. Are Costco’s member renewal rates higher or lower than 85 percent on average?
9. Is Costco the fifth largest retailer in the United States?
10. Does Costco have more than 500 warehouses worldwide?
Answers: 1. No. 2. Yes. 3. Yes. 4. Yes. 5. Yes. (Anyone buying on credit is a high-quality customer.) 6. Yes. 7. Yes. 8. Higher. (86 percent.) 9. Yes. 10. Yes. (618 stores worldwide.)
Based on the information above, Costco looks like a surefire winner. That’s pretty much the case, but this story isn’t without warts. Well, maybe that’s a bit harsh. Let’s make them pimples. One negative is that Bill Gates recently sold his entire stake in Costco. Another negative is that Tiffany & Co. (NYSE:TIF) recently accused Costco of selling forged diamond engagement rings, which has potential to damage the Tiffany brand name. And perhaps the biggest negative of all is fierce competition.
Let’s take a look at more important numbers prior to forming an opinion on the stock.
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