5 Best US Stocks to Buy Now

4. Costco Wholesale Corporation (NASDAQ: COST)

Number of Hedge Fund Holders: 56

Costco Wholesale Corporation (NASDAQ: COST) is a Washington-based firm that operates membership-only retail stores around the world. It was founded in 1983 and is placed fourth on our list of 10 best US stocks to buy now. Costco stock has returned more than 25% to investors over the course of the past twelve months. The firm is one of the largest retail companies in the world with a market cap of over $168 billion. Costco is also one of the largest retailers of beef, organic foods, and rotisserie chicken.

On May 13, investment advisory Argus increased its price target of Costco Wholesale Corporation (NASDAQ: COST) stock to $420 ahead of the announcement of the earnings results of the retailer. Costco shares jumped over 2% following the update. 

Just like Amazon.com, Inc. (NASDAQ: AMZN), Tesla, Inc. (NASDAQ: TSLA), and Caterpillar Inc. (NYSE: CAT), Costco Wholesale Corporation (NASDAQ:  COST) is one of the best US stocks to buy now. 

In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ: COST) was one of them. Here is what the fund said:

“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.

Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”