COST

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Costco’s Shares Are Not Cheap

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Image Source: Costco By Brian Nelson, CFA Costco Wholesale Corp. (COST) recently reported fourth quarter fiscal 2025 results, and they were quite good. Both revenue and GAAP earnings per share exceeded expectations. Net sales for the quarter increased 8%, to $84.4 billion, while adjusted comparable sales increased 6.4% on a total company basis, a deceleration from the adjusted annual rate of 7.6%, but still strong. Adjusted comps in the U.S. increased 6%, 8.3% in Canada, and 7.2% in its Other International segment. Adjusted e-commerce revenue grew 13.5% on an adjusted basis. Paid memberships grew 6.3%, while the number of total cardholders expanded 6.1%. Its worldwide membership renewal rate was 89.8%. Management was upbeat on its outlook on the conference call: … Read more

Walmart Raises Outlook for Fiscal 2026

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Image Source: Walmart By Brian Nelson, CFA On August 21, Walmart (WMT) reported disappointing second quarter results that showed a beat on the top line, but a miss when it came to non-GAAP earnings per share. Revenue growth was 4.8% on a year-over-year basis, up 5.6% in constant currency. Walmart U.S. comp sales were up 4.6% (consensus was 4.1%), with strong growth in grocery and health & wellness. Operating income, however, decreased 8.2%, and up only a marginal 0.4% on an adjusted basis (constant currency). Adjusted non-GAAP earnings per share of $0.68 missed estimates by $0.06. On a global basis, eCommerce expanded 25% led by store-fulfilled pickup & delivery and marketplace. Management had the following to say about the results: … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Walmart Talks of Higher Prices Due to Tariffs; Trump Takes Exception

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By Brian Nelson, CFA On May 15, Walmart (WMT) released first quarter fiscal 2026 results that showed revenue and non-GAAP earnings per share coming in ahead of expectations. Revenue grew 2.5%, up 4% in constant currency, while operating income advanced 4.3%, or 3% when adjusted for constant currency. Walmart U.S. comp sales increased 4.5% with particular strength in health & wellness and grocery. E-commerce grew 22% thanks in part to store fulfilled pickup & delivery and marketplace and achieved profitability in the U.S. and globally in the first quarter for the first time. Though Walmart’s performance was solid in the fiscal first quarter, the Street focused on the executive team’s commentary regarding tariffs on the conference call: We will do … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Dividend Increases/Decreases for the Week of April 18

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Below we provide a list of firms that raised their dividends during the week ending April 18. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                          ASML (ASML): now $1.92 per share quarterly dividend, was $1.57. Bar Harbor Bankshares (BHB): now $0.32 per share quarterly dividend, was $0.30. Choice Properties Real Estate Investment Trust (CHP.UN:CA): now CAD 0.0642 per share monthly dividend, was CAD 0.0641. Coca-Cola FEMSA (KOF): now $0.8830 per share quarterly dividend, was $0.7811. Companhia Paranaense de Energia – COPEL (ELPC): now $0.1172 per share quarterly dividend, was … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Costco Is Not Immune to Tariff Pressures

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Image Source: Costco By Brian Nelson, CFA On March 6, Costco (COST) reported mixed second quarter fiscal 2025 results with revenue exceeding the consensus forecast but GAAP earnings per share missing the mark. Net sales in the quarter advanced 9.1%, while total company comparable sales growth came in at 6.8%. E-commerce revenue increased 20.9% (22.2% adjusted) in the 12 weeks ended February 16, 2025. Backing out changes in gasoline prices and foreign exchange, total company comparable store sales increased 9.1% (versus 6.8% consensus). Net income for the quarter came in at $1.788 billion, or $4.02 per share, compared to $1.743 billion, or $3.92 per diluted share in last year’s quarter. Management noted the following about tariffs on the conference call: … Read more

Target Expects Ho Hum Holiday Results

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Image Source: Target By Brian Nelson, CFA Target (TGT) recently reported third quarter 2024 results that missed on both the top and bottom lines, and the retailer issued ho-hum guidance for the holiday fourth quarter. Third quarter comparable sales advanced 0.3% in the third quarter (versus consensus expectations of 1.5%) as strong traffic and digital performance were offset by a comparable store sales decline of 1.9%. Guest traffic grew 2.4% in the quarter, however, while digital comparable sales increased 10.8% thanks to growth in same-day delivery and drive up. Beauty comparable sales grew more than 6% in the quarter, while Food & Beverage and Essentials categories grew low-single digits compared to the same period last year. Its gross margin rate … Read more