For most investors, value means scraping the bottom of the barrel to find the best possible deal on the market at any given time. With prices constantly changing, finding such a deal is near impossible, given both the breadth and scope of financial markets today.
Putting a company on a watch list and watching, waiting for the right time to pounce, is one way of going about the value investing path. One such company I have been watching of late is Costco Wholesale Corporation (NASDAQ:COST), a company which has seen its share price drop nearly 20% from its peak just two months ago on renewed worries about the potential long-term impact e-commerce firms will have on the grocery retail business.
After the recent announcement of the Whole Foods Market (NASDAQ:WFM) acquisition by Amazon.com, Inc. (NASDAQ: AMZN), the share price of most retailers fell dramatically, with Costco being no exception. While the stock market did what it always does, pricing in risks and uncertainties into the stock prices of all companies, I have found the corresponding price discovery with Costco to be largely overdone, for a number of reasons.
In my opinion, Costco remains much more insulated with respect to many of the external pressures stemming from e-commerce due to Coscto’s underlying business model, one which relies on a unique "bulk value" system to drive its mega-warehouse revenues and earnings higher each and every quarter.
On a fundamental basis, Costco far outperforms companies like Whole Foods, and I anticipate this will continue for the foreseeable future, due to a business model which provides a return on equity and dividends (special dividends) most retailers can only dream of.
Invest wisely, my friends.
