☕ Costco – Still a buy?

Good morning! 👋

Here we go again!

All three major indices are falling after a hot jobs report spikes the US10YR.

Here is my playbook.

1- Hot jobs = higher rates

I wrote to you earlier this week telling you how this works.

In a nutshell, and in case you missed it, a hot jobs report makes the highly leveraged, fast-buck crowd think that the Fed will use this as an excuse to keep rates higher longer. So, they start selling because they want to avoid a king-size margin call or find out they’re over-extended.

It’s an opportunity, not something to fear.

I've been vocal about the fact that I believe the Fed will hike one more time this quarter because I suspected data like this would appear.

Now that it has…

• Continue to hold excess cash in short term treasuries or something similar to squeeze the few more percentage points out of ‘em before the Fed pauses or cuts; and,
• Start buying a little more aggressively, big tech and energy in particular.

2 – Costco - Hooyah!

The stock soared last night after reporting a revenue jump of 10% in December. (Read)

People argue with me constantly about whether the stock is expensive and that it can’t possibly become any more valuable. To which my response is always the same, “we’ll see” with a wry grin on my face.

My target is $725 and/or a split within the next 12 months.

Incidentally, if you’re an OBAer, chances are good you’re smiling ear to ear. I brought Costco to your attention in late August 2021, and it’s returned 49.94% since then vs 8.75% from the S&P 500 over the same time frame according to Koyfin.

Hooyah!

Keith’s Quick Tip: A generation of investors has purchased index funds thinking they’re going to do just fine… and for a long time, they did. Now, those things are holding ‘em back. Today’s markets are such that you have simply got to start buying individual stocks like COST if you want to win and pull ahead.

3 - Cheap latte, cold brew, and a subscription?

It’s a business model that tech companies pioneered years ago to juice their valuations.

Sell monthly subscriptions to customers looking for a deal.

This time around it’s Blank Street Coffee that’s grown from a single coffee cart three and a half years ago in Brooklyn to 74 locations in New York City, London, Boston, and Washington. It’s also got $100M in funding according to pitchbook.

At first glance, this sounds really appealing and like a business you want to invest in ... but this is exactly the sort of playbook aggressive venture capitalists and company insiders who are in at pennies per share use to go public with great fanfare a year from two from now.

Be careful.

IPOs in today’s markets are one of the most rigged exercises in existence.

When I first started my career, IPOs were a source of valuable capital for growing businesses. Now unfortunately, they are usually an exit for the founders and early investors intended to make ‘em wealthy instantly by offloading shares to unsuspecting individual investors in search of a quick buck.

My POV: Let a company prove itself for a few quarters or two after going public; then buy it if you want. Or simply invest with founders and use the IPO game to your advantage and at the investing public’s expense. 🤦‍♂️

4 – I never thought I’d see this

Here’s one for you.

Jumbo, a grocery chain with more than 700 locations in Belgium and the Netherlands just reported that the value of items stolen from its stores by shoplifters was 25% greater than last year’s profits. (Read)

I think, unfortunately, this is a sign of things to come here in the US.

Trade Idea: Buying Putskies on our major grocery chain stocks could play nicely, particularly those that have operations centered in key urban areas experiencing high theft like NYC, San Fran, Portland etc. Simultaneously going long private security companies could make it interesting.

5 – I can’t get you into today’s keynote but here’s the next best thing

I’m keynoting the annual kick-off meeting for one of the world leading technology consulting companies later this morning. I wish you could attend because it’s going to be a fabulous discussion but unfortunately, it’s locked down to just their employees.

So, I’ve got the next best thing.

I recently sat down for a wide raging discussion with Eric Chemi of Wealthion and thought you might enjoy watching tremendously. (Watch)

Bottom Line

I don’t mean to make light of all the selling that’s hit the markets this week.

Just understand this.

Any fear you’re feeling is a catalyst for growth, knowledge, and yes, profits.

Contrary to what people think, it’s not something to be exploited at your expense, but an emotional input you can learn to recognize, overcome and use to your advantage.

You got this – I promise!

MAKE it a great day,

Keith 😊