Author Topic: Costco  (Read 3487 times)

Portland Man

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Costco
« on: November 28, 2012, 09:35:11 AM »
I know Costco the company has strong Mustachian support from the consumer side.

With a $7/share special dividend, does it have Mustachian backing on the investor side?

iamlindoro

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Re: Costco
« Reply #1 on: November 28, 2012, 09:46:21 AM »
Costco stock in general is a solid performer that tends to match or outperform the market over the past few years.  Anyone getting in now missed the initial bump from the special dividend, but that doesn't mean it isn't a decent choice to buy and hold over the long run.  I like (but do not own) Costco stock.  The dividend yield is only so-so on average though.

tooqk4u22

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Re: Costco
« Reply #2 on: November 28, 2012, 10:30:44 AM »
The dividend is essentially irrelevant and will have the effect of lowering the share price by $7 all else being equal - so not sure what the big lift is for today (up $5 to get $7 that was on the books yesterday).

Costco is best in class but it seems richly valued to me with a 24 PE Ratio and 10x EBITDA - kind of priced for perfection.

Basically they are dividending out all of their operating cash flow for the quareter and will likely have to borrower $2B to cover it, which is fine because they hardly have any debt so it will barely move the dial. 

Portland Man

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Re: Costco
« Reply #3 on: November 28, 2012, 12:28:17 PM »
Ruger (NYSE: RGR) did essentially the same thing a couple weeks ago, announcing a special dividend of $4.50/share.  The ex-dividend date is in the next week or so, the price has gone up $10/share since the announcement.  That's a dpy (heh) of almost 3%, and even if the market adjusts the full $4.50 it is looking like a hell of a short term investment for someone who bought the day after the announcement.

I wish I would have pulled the trigger (heh) on that, and I did buy 30 shares of Costco this morning.  Small potatoes, but we'll see how it shakes out.

jpo

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Re: Costco
« Reply #4 on: November 28, 2012, 01:02:00 PM »
Lots of companies are paying out special dividends anticipating a tax rate hike. I have a couple, LTD and ATRI.

tooqk4u22

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Re: Costco
« Reply #5 on: November 28, 2012, 02:40:17 PM »
Ruger (NYSE: RGR) did essentially the same thing a couple weeks ago, announcing a special dividend of $4.50/share.  The ex-dividend date is in the next week or so, the price has gone up $10/share since the announcement.  That's a dpy (heh) of almost 3%, and even if the market adjusts the full $4.50 it is looking like a hell of a short term investment for someone who bought the day after the announcement.

I wish I would have pulled the trigger (heh) on that, and I did buy 30 shares of Costco this morning.  Small potatoes, but we'll see how it shakes out.

The pop you saw in RGR was driven by 3Q performance with sales and and net income beating estimates by 5% and 10% respectively and the redneck fear of Obama armeggedon trade is estimated to drive sales up further (the chart explodes after the election).  Actual YoY change from the quarter is 47% for sales and 57% for income, so it was a really good quater.

To some extent Costco is the same as it reported that sales were ahead of expecations for November. 

The special dividends may give it a bit but that is not the overiding driver - at least for sophisticated/institutional investors.

Portland Man

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Re: Costco
« Reply #6 on: November 28, 2012, 03:03:59 PM »

The pop you saw in RGR was driven by 3Q performance with sales and and net income beating estimates by 5% and 10% respectively and the redneck fear of Obama armeggedon trade is estimated to drive sales up further (the chart explodes after the election).  Actual YoY change from the quarter is 47% for sales and 57% for income, so it was a really good quater.

To some extent Costco is the same as it reported that sales were ahead of expecations for November. 

The special dividends may give it a bit but that is not the overiding driver - at least for sophisticated/institutional investors.

The Obama pop was part of it, but compare Ruger and S&W, they tracked pretty close after the election, but  pop was trailing when they announced the special dividend, and Ruger skyrocketed after that.

I hadn't actually done that by comparing them beyond watching the prices daily, but SWHC has had much better performance than RGR this year, (until this last week), which surprises me as Ruger has been kicking ass and actually stopped taking orders earlier this year because demand was outpacing their ability to supply.