"Finding its way onto the short-term bullish list is discount retailer Costco Wholesale (NASDAQ: COST), our 'focus stock of the week'," says Chris Johnson in his contrarian advisor service, Insightful Investor.
"The warehouse giant is currently seeing a positive mix of technical strength along with growing pessimism that makes it a potential outperformer. Costco is one company that has maintained a level of demand not seen throughout the bulk of the retailing sector.
"COST's core business, which caters to small businesses and households willing to buy in bulk, has maintained strength despite the slowing economy. In fact, the company's latest earnings report, released March 5, beat analyst expectations by 23%.
"Reflective of its fundamental strength, COST's stock price has remained a relative strength leader by trading above its 50-day moving average. The equity has outperformed not only most of its peers in the retail group, but the overall market as well.
"Despite this fundamental and technical strength, our sentiment indicators are showing increased pessimism toward the shares. COST's put/call ratio suggests that we could see some additional strength for the stock in the coming weeks.
"Analyst recommendations on COST also show skepticism. Only 27% of covering analysts recommend a 'buy' on the stock. The light buy recommendations are likely due to weakness in the overall retail group.
"The fact that COST appears to be among the 'best of breed' for retailers warrants more favorable attention from the analyst community. We thus anticipate upgrades that should boost the stock price. We also recommend leveraging the play by purchasing the May 62.50 call."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
4-18-2008 @ 7:49AM
al coholic said...
Using the Peter Lynch mehod of using personal observations added to DD I agree wilth you.
In my town (Greenville, SC) we have Costco, Sams, and BJ's. At least for me, Costco has been the best shopping experience.
BJ's is usually a ghost town and has a mix of goods that doesn't excite me. Sams is good but Costco is great.
I have noticed more small business customers at Sams than either of the two others.
To me, Costco is more tuned into the more affluent crowd, with better quality wines, and generally higher quality goods. Their customer service is way ahead of the other two, and their quality of help is definitely better. Maybe that's because they pay better.
On the dark side, because they seem more consumer oriented maybe they will suffer more if consumer spending hits the wall.
Just my opinion.