Many companies are coming off of strong earnings reports from the past year. Those numbers were influenced by the prior year, where pandemic shutdowns made things look horrific.
Now, with the added challenge of a slowing economy and high inflation, investors need to weed through those companies likely to lose market share amid current market conditions and those that can eke out a larger stake in their sector.
As the retail space looks to condense, a few big box stores look like they’ll grab more market share. One potential big winner is Costco (COST). The warehouse club mostly breaks even on its sales and low prices, but makes its profits from services, including its annual membership fee.
The company has reported slower store sales in the past few months. But, those numbers are still well above pre-pandemic levels. That’s a sign the company will continue to gain market share amid challenging economic conditions for consumers.
Action to take: Shares have rebounded nicely from their June lows, but are still well under their 52-week highs. Today’s buyers can get a 0.7 percent dividend yield here, and the company has a history of paying out special dividends every few years.
For traders, the rally off the bottom is likely to continue. The January $600 calls, last going for about $13.50, offer mid-double-digit return potential 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.