Retail still makes up the backbone of consumer spending, and thus the economy. That’s why providing investors with sales data can provide a clue as to how the economy is performing outside other measures like employment or housing costs.
One such retailer is Costco (COST). The company recently released its latest earnings, which shows that consumers are continuing to spend at a good pace, and even increasing in some areas such as fresh food.
The earnings numbers and the company’s outlook were enough to move shares slightly higher. Shares are just slightly off an all-time high of nearly $470 per share, and the strong earnings numbers may be enough to move shares back to new highs in the coming weeks.
Shares have slightly underperformed the S&P 500 over the past year, and are a bit conventionally expensive at 40 times forward earnings. Nevertheless, the company’s powerful brand and earnings income from subscriber growth make for a compelling company to own for the long haul.
Action to take: The uptrend in shares is likely to continue over time. Investors can lock in a 0.7 percent dividend yield here. It’s not huge, but the company also often pays out special dividends to shareholders every few years that boost overall income returns.
Traders may like the January $475 calls. They have plenty of time to play out, and could easily move in-the-money given the company’s longer-term prospects. The option last went for about $12.00, and could deliver mid-to-high double-digit returns in the months ahead.
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.