For long-term investors, there’s no better place to be than in industry leaders. Every industry has one. The company that has better products and profit margins than competitors. In a bull market, they’re correspondingly more expensive. In a bear market, that may be true… but the company’s valuation may be better.
That’s why patient investors can pick up great companies at a far more reasonable value during a bear market. Doing so can lead to market-beating profits on a rebound.
One company we see as an industry leader is Costco Wholesale (COST). They’ve mastered the business of being a warehouse retailer. They offer low prices on goods, typically provided they’re bought in bulk. And the business model is to run the retail operation at cost, while making profits by selling membership fees.
Costco is down about in-line with the overall market in the past year. But revenues are up 8 percent, and earnings are up 3 percent amid a slowing economy. So it’s no surprise that the company is looking reasonably valued for long-term investors today.
Action to take: Shares are high-priced, but the company will likely thrive in any market condition. Plus, the company is a dividend grower, with a starting yield of about 0.8 percent right now.
Traders should look for a snap higher in the coming months. The April $500 calls, last going for about $14.00, offer mid-double-digit returns on such a move.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.