Costco: Hold shares

Posted Nov 30th 2009 1:40PM by Joseph Lazzaro
Filed under: Costco Wholesale (COST)

I'm placing a hold on Costco's (COST) shares, first recommended on May 19, 2009 at a price of $47.21.

The hold is primarily due to valuation - P/E of 24 - and the possibility of a pull-back in shares in December, due to year-end profit-taking by short-term institutional investors.

Meanwhile, Costco's business model remains strong: a value-oriented consumer warehouse with an appropriate middle-income, near-upscale product mix that's likely to draw in many 'suddenly just middle class' consumers whose income has been constrained/lowered by the recession. Translation: market share gains for COST. The First Call FY2010/FY2011 EPS estimates for COST are $2.89 to $3.22.

I'll re-evaluate Costco in early 2010, following the end of the holiday shopping season.

Stock Analysis: Costco is a moderate-risk stock. If you've already purchased the company's shares, hold them. If you haven't, Don't Buy shares at this time. Sell/Stop Loss if you bought shares in this company: $36.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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