Blog > Hot Stock Pick of the Week > Blog article: Retail Stocks: Costco (COST:Nasdaq) is up 19%. Dollar Tree (DLTR:Nasdaq) soars
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Retail Stocks: Costco (COST:Nasdaq) is up 19%. Dollar Tree (DLTR:Nasdaq) soars

Posted May 8, 2008

Update 05/08/2008 10:55 AM: Laura Cadden has just issued a recommendation to sell DLTR for a 40%-plus gain. Read’em and weep!

By J. Christoph Amberger

Baltimore — (TFN): Early retail sales reports issued this morning indicate that shoppers focused on basic consumer goods over the past month and bought at discounters and wholesale clubs. Wal-Mart Stores Inc. and Costco Wholesale Corp. came in among the top performers last month.

TFN currently follows two discount retailers.

Laura Cadden’s recommendation of Dollar Tree Stores (DLTR-Nasdaq) has been moving down over the past two days after coming just within striking distance of her sell price. ***Update 05/08/2008 10:55 AM: Laura Cadden has just issued a recommendation to sell DLTR for a 40%-plus gain. Read’em and weep!

On February 7, 2008, in our TFN Hot Stock Pick of the Week, I suggested that you buy discount wholesale giant Costco (COST) “around or below $65, for medium-term gains of 15-20% by mid-year”. The stock was trading just below $65 at the time.

You know how it is: The moment you make a recommendation like this, the stock price drops. On March 1, at around $62, I repeated my recommendation at the lower price. The reason was quite simple: I had to stop buy at our local Costco the pervious weekend, and despite analysts and newsletter editors just wallowing in gloom, I had to park at the far end of the lot, so many Costco members were shopping!

Yesterday, COST stock hit a 52-week high of $74, we are up13% over my initial buy, and over 19% above the secondary entry price level. The company will be paying a 16-cent dividend in late May.

And it’s not necessarily today’s retail sales that make me believe this stock will be weathering any kind of economic downturn. Its membership revenues will continue to grow, not contract. After all, just filling your gas tank every other week with COSTCO gasoline almost covers your annual membership fee.

Hold on to COST as your long-term cornerstone of your recession-proof portfolio! I’d not be surprised to see $80 on this stock within the next three months.

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Posted by J. Christoph Amberger · Filed Under Hot Stock Pick of the Week, US Stocks and Markets 

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