Consumers Remain King, And So Does This Retail Play

Even with the rise of e-commerce, it’s clear that some retail companies will continue to dominate the in-person experience. Those companies are usually big box stores, which offer sufficient variety as well as low prices.

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  • That’s why it’s no surprise that these companies have done well this earnings season. And why so many have also expanded their online presence, even if they’re still relatively smaller players there.

    One of the top retailers for this trend is Costco (COST). The warehouse giant is famous for keeping its profit margins low, and for providing a great customer experience that it makes up for on volume.

    The company just reported earnings of $2.75 per share, up from $1.89 per share a year ago. Revenue was up 21.5 percent as well. This earnings and revenue beat comes with shares already near all-time highs.

    Action to take: With shares near all-time highs, it’s the kind of name to keep on a watchlist for buying on a dip. The drop from February to March marked an excellent entry point, and 10 percent pullbacks in any stock are fairly common. Investors should consider those dips, given the company’s propensity for special dividends on top of its current one.

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  • For traders, the current uptrend is likely to continue. The October $400 calls, trading or about $13.50, can deliver mid-to-high double-digit gains. As with any options trade, look to exit early for the next winner. While a great company, there’s no telling when the next downtrend (and buying, not trading, opportunity) will occur.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.