- Costco Wholesale (COST) offers defensive appeal during uncertain times.
- COST stock has strong appeal, whether a recession looms or not.
- Investors should hold their positions or consider starting a position in Costco today.
Inflation, stagflation, recession: these are frightening words, and many people in financial media love to throw them around. If you’re feeling anxious and are ready to play defense — or even if you’re just in the market for a great growth-and-value combo — consider Costco Wholesale (NASDAQ:COST). COST stock has something for everyone.
Got an eagle eye for value? Costco offers both its shoppers and its investors supreme bargains. The shares might look expensive at first, but dig deeper and you’ll find they’re a steal at just about any price.
Income investors, growth investors and even gloom-and-doom prognosticators can benefit from a position in COST stock. It’s not necessarily a “sexy” investment, but Costco shares can help you grow your portfolio with calm and confidence during turbulent times.
Costco offers its investors a steady path to wealth building. Recession or no recession, you’ll be glad you stocked up on a proven winner.
| COST | Costco Wholesale | $562.81 |
What’s Happening with COST Stock?
Granted, it’s not easy to convince people a $560 stock is cheap. But let’s look at the facts before making any judgments.
For one thing, Costco’s trailing 12-month price-to-sales (P/S) ratio is 1.2x, which isn’t outrageous at all. The company’s trailing 12-month price-to-earnings (P/E) ratio of 46.1x might be slightly elevated, but it’s not extremely high for Costco.
Really, $560 per share isn’t too much to ask for COST stock. The company is firing on all cylinders, financially speaking. For instance, Costco’s net sales for the fiscal second quarter of 2022 increased 16.1% to $50.94 billion.
Not only that, but Costco’s net income for the quarter totaled $1.3 million. That’s a sizable improvement over the year-earlier quarter’s net income of $951 million.
Meanwhile, income-focused investors should appreciate that Costco recently raised its quarterly dividend by 13.9%. Clearly, this is a company that likes to reward its loyal shareholders.
As for growth investors, you won’t go wrong with COST stock. Just a year ago, the share price was below $400. After having broken through the $600 level recently, the buyers definitely have momentum on their side.
A Recession-Resistant Asset
Lately, there’s been a lot of talk about a possible recession this year. Maybe it will be prompted by high inflation, which prevents some people from shopping because the prices of goods are so high.
Let’s not let recession anxiety prevent us from buying a perfectly good asset, though. After all, COST stock rebounded quite nicely after the Covid-19-prompted recession struck in 2020.
As for the next couple of years, Jan Hatzius, chief economist at Goldman Sachs, sees “the odds of a recession as roughly 15% in the next 12 months and 35% within the next 24 months.”
Thus, the probability of a recession occurring during the next year seems to be fairly low. And if a recession, hyperinflation and/or stagflation do occur, Costco should continue to make money as shoppers seek low prices on essential products.
Besides, for the time being, the American consumer is alive and well. In fact, not long ago, it was reported that U.S. retail sales grew for three consecutive months.
Furthermore, Costco’s customers are loyal. Amazingly, Costco’s renewal rates for its memberships are around 90%. Plus, the company’s membership increased 7% during Costco’s latest fiscal year to an astounding 61.7 million.
What You Can Do Now With COST Stock
All in all, it’s hard to go wrong with a long-term investment in Costco. Irrespective of your investment style (growth, value, income, defensive or whatever it may be), there’s a strong argument that you should hold at least a few shares.
If you don’t already own COST stock, feel free to start a position regardless of where the price happens to be today. And if you’re already invested, there’s no need to do anything — you’re already set up to build your wealth over time.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
