Why Costco May Be A Good Investment Despite Declining Share Prices
Some might say it’s a cruel world in which rising inflation corresponds with falling stock prices, as is currently the landscape (via NPR). But there is a potential silver lining, according to Investopedia, which is that dips in stock prices may present an opportunity to get in on a company you believe in, but which may have been previously “overvalued.” (I.e., its stock price is elevated to a degree not necessarily reflected in the related company’s performance and prospects.) Such may be the case with discount warehouse department store and grocer Costco, as some experts, including The Motley Fool and TheStreet, are now suggesting.
As TheStreet puts it, although Costco’s share prices dipped 22.83% in the last six months, current investors may be well-advised to white-knuckle it in the near term. Reasoning that the drop in share price isn’t specific to Costco so much as reflective of general concern for the future of retail companies amid unprecedented consumer price inflation, TheStreet explains that, compared with many other big-box retailers, Costco has the advantage of its membership model. Of course, some Costco food items fell victim to inflation recently, but this hasn’t negated the warehouse chain as a money saver just yet.
In other words, sticker-shocked consumers may be avoiding shopping in droves, but Costco keeps bringing in, and retaining, its members — and that is where much of its value lies. It may indeed make Costco a stock worth considering adding to your portfolio while the price is still down, whether directly as an individual stock or via a mutual fund that invests in Costco.