New Trade for November 2nd, 2020

Futures are green this morning, indicating that the stock market is looking to bounce back from a horrendous week and month.  Each of the major indices is up more than 1% in early trading, with the Dow pointing to an opening gain of more than 400 points.  

Ahead of tomorrow’s election, Biden still holds a substantial lead over President Trump.  Trump has consistently expressed his criticism of the validity of mail-in voting and has said that he wouldn’t necessarily accept the election outcome.  

The lack of clarity from the president breeds the kind of uncertainty that has fueled more than a few market sell-offs.  Today we are highlighting one company that is positioned to benefit amidst the current conditions.  

As the average consumer heads into election, with covid cases spiking to record highs, the stockpiling mentality that began during the pandemic is only likely to grow.  If we get a contested election, people are going to stock up even further.  Warehouse club operator, Costco (COST) will likely continue to benefit as citizens prepare for the winter.  

Digging into the valuation, COST stock does come at a premium, with a forward P/E ratio of 38.03 compared to its industry’s average Forward P/E of 21.62.  But, share price for COST stock gained 2.81% last month while the Retail-Wholesale sector only gained 1.34% and the S&P 500 lost 2.23%.

Costco will be looking to display strength as it nears its next earnings release, scheduled for December 10th.  COST is projected to report earnings of $1.97 per share, which would represent year-over-year growth of 13.87%.  Recent positive changes to analyst estimates for COST are a good sign for the company’s outlook.  However, investors should note that the overall consensus projects a slight miss for upcoming earnings.


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