Costco: A Safe And High Potential Bet

Summary
  • Costco has tons of strong momentum and likely benefited from the COVID-19 pandemic.
  • There are a multitude of reasons that Costco will be a lower risk and higher reward buy going forward.
  • The major downside is its pricey valuation for its industry, but it is a fair price to pay for such a wonderful company.

Since the pandemic began in the U.S. in early February, Costco (COST) has been a popular destination and topic. Numerous images surfaced online of shoppers lining up and hoarding items at Costco.

While this trend has stabilized since then, Costco is still a great stock to buy during these times. Costco is not just a wonderful company for your bulk purchases, but also your investment portfolio.

Costco’s Growth Is Accelerated By The Pandemic

Costco saw an immense growth in foot traffic during the beginning of the pandemic due to hoarding in anticipation of lockdowns. The traffic declined in the second quarter of 2020 but it likely was caused by cautious consumers wanting to make fewer trips out of safety but increasing purchases per trip. Starting in the third quarter, traffic has returned to normal.

Source: Statista

With the pandemic continuing forward and resurgences of the virus threatening more lockdowns, Costco could significantly benefit from more consumer hoarding. The pandemic is also likely to accelerate demand for Costco’s warehouse model as consumers who hoard and want to minimize trips can take advantage of bulk purchases.

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