Stocks seemed to be looking for a direction in early trading in the wake of yesterday’s downbeat session as the summer rally continues to fade amid concerns of a slowing economy. Later this week, we’ll get a clearer picture of whether inflation has peaked and how consumers are reacting to higher prices with the latest readings of the Personal Consumption Expenditures Price Index (PCE) and the University of Michigan’s Consumer Sentiment Index (MCSI).
Recent data showed that more than sixty percent of the U.S. population are buying only the essentials as the prices of many goods and services continue to skyrocket. Today we’re highlighting a retailer that Wall Street calls “absolutely essential” as inflation forces consumers to tighten their belts. What sets this consumer staples mega-cap ahead of its peers is its winning business model that will likely help the company flourish when the market begins to recover and tremendous cash flow to help sustain the business through rough patches.
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With inflation at 40-year highs, many consumers are looking for ways to save on everyday essentials. Membership-only big-box retail giant Costco (COST) is the go-to when consumers want to buy in bulk. Over the past year, COST share price has gained 20%, outperforming its retail peers, evidenced by the performance of the SPDR S&P Retail ETF (XRT), which has dropped 30% over the same period.
The company also has tremendously reliable cash flow compared with other retailers, with some 67 million paid Costco memberships at roughly $60 per pop in annual dues. COST also enjoys a robust $4 billion in yearly sales rolling in simply from renewals. Costco currently boasts a 92% renewal rate for its 114.8 million-and-growing base of cardholders. In the latest quarter, the company sustained strong 16% sales growth and grew net income by 37%. Same-store sales of 14.4% were impressive, especially as the company lapped its stellar pandemic performance.
At 39x forward earnings, COST price may still be high, but considering the upside potential based on projected membership cost increases, the high cost could prove well worth it. Costco has a history of raising membership fees every five to six years. The last fee increase was in June 2017. In May, the company confirmed that it does not have plans to increase its membership fee right now, given the current macro environment. However, investors will likely enjoy a boost from higher membership fees in the not-too-distant future.
Should you invest in COST right now?
Before you consider buying COST, you'll want to see this.
Investing legend, Keith Kohl just revealed his #1 stock for 2022...
And it's not COST.
Jeff Bezos, Peter Thiel, and the Rockefellers are betting a colossal nine figures on this tiny company that trades publicly for $5.
Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.
Find that to be extraordinary?
But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
A company with 400 million ‘patents’
One company has quietly compiled more than 400 million official trade secrets.
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Not surprisingly, Wall Street is starting to take notice. And the smart money is already pouring in.
Tech investor Cathie Wood has invested over $80 million already, and Microsoft founder Bill Gates has invested as well.
Get the details here before this story hits the mainstream media.