Presidents Day Sale: 12 Unbeatable Trades at Sale Prices

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Costco (COST)

Everything You Want on Sale -- Including the Stock

By Nick Atkeson and Andrew Houghton

In his1992 campaign to oust President George H.W. Bush, Bill Clinton declared, “It’s the Economy, Stupid.”  President Obama, with his attention riveted on the economy, declared “Yes We Can,” and went ahead and placed earnings limits of $500,000 on executives at financial firms that receive bailout funds.

A $500,000 annual salary is a great income. One might think that earning $500,000 would mean you do a majority of your shopping at Neiman Marcus, Tiffany's or Saks.  But the truth is when you own a multimillion-dollar home, send your kids to private schools, vacation at Four Season Resorts and pay your club memberships -- what's left is a trip to Costco (COST) to buy the basics that really support your life.

Not only to the $500,000-plus crowd shop at Costco, we all do. It is a great retailer that is continuously upgrading the merchandise it sells at incredibly affordable prices. In fact, Costco may be the best-managed major retail company in the market today.

The best price offering at Costco is its stock price. It has been marked down from its 52-week high at $75 to about $45 today.  A 40% -off sale on one of the premier American retailers that is rapidly taking share in an array of retail segments (recently grocery, gasoline and consumer electronics) is a good deal.

The company’s FY 2009 earnings are estimated to be $2.67. The stock is trading at about a 16x P/E.  With no net debt (cash less long-term debt), selling products we all need to buy at the best prices available and with a top-notch management team, we believe this is one President’s Day sale we should put in our basket.

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