We recently compiled a list of the Jim Cramer Discussed These 11 Restaurants and Retail Stocks. In this article, we are going to take a look at where Costco Wholesale Corporation (NASDAQ:COST) stands against the other restaurant and retail stocks Jim Cramer recently talked about.
Jim Cramer, the host of Mad Money, recently took a closer look at the state of the consumer, focusing on restaurants and retailers to understand the broader economic picture. According to Cramer, there is a common misconception about the economy, where people tend to think of the consumer as one homogenous group. He pointed out that there isn’t a single consumer whose behavior can explain the overall economic trends. Instead, Cramer identified two distinct types of consumers in today’s market.
“One consumer’s going out looking for absolute bargains. The other consumer’s looking for what I call “premium value” or “value at a price”. More expensive, but relative to similar offerings, you get a great deal.”
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This conclusion came after Cramer listened to a variety of retail and restaurant earnings calls. He expressed skepticism about relying on broad aggregate data, such as national retail sales, which he believes doesn’t capture the full picture. Instead, Cramer prefers analyzing individual companies, piecing together information from different sources to form a clearer sense of the consumer landscape. He believes this approach provides a more accurate snapshot than relying on overarching statistics.
Cramer also noted that the rise of these two different consumer types has perplexed Wall Street. In the past, there was typically one consumer who either spent or didn’t, but that has changed. Now, there are two groups of consumers, each spending in different places.
In his conclusion, Cramer urged investors to stop focusing on whether consumers are struggling financially or facing challenges. The key, he said, is understanding choice.
“The bottom line: Stop trying to figure out if the consumer’s cash strapped. Forget the headwinds. What matters is choice. Right now, consumers are lapping up absolute value at the lowest price or premium value, meaning better stuff that’s a good deal versus the competition. But everything else? Maybe not so much. Hence why the aggregate numbers just don’t tell the story.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 19. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer in a warehouse aisles, browsing the wide range of branded and private-label products.
Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 75
Discussing Costco Wholesale Corporation (NASDAQ:COST), Cramer remarked:
“Now there are some straddlers that seem to please everybody like Costco and Chipotle, maybe that’s why their stocks have such high price-to-earnings multiples… Costco appeals to anyone who has enough space at home to take advantage of its bulk merchandise.”
Costco (NASDAQ:COST) operates a membership-based warehouse model that offers a wide array of branded and private-label products, with a focus on bulk sales, which provides customers with significant value. The company’s business model has made it a popular choice for shoppers looking to purchase items in larger quantities at lower prices.
During the first quarter of its fiscal 2025 earnings call, Chief Financial Officer Gary Millerchip shared insights into current consumer behavior. He noted that while customers have become more selective with their purchases, they are still willing to spend, particularly as inflation subsides. Shoppers are showing a preference for products that offer a combination of novelty, quality, and value.
Millerchip also pointed out a shift in spending habits, with some customers continuing to purchase higher-end products, like premium cuts of meat, while others are opting for more affordable options across categories such as poultry, beef, and pork. Moreover, Costco’s (NASDAQ:COST) membership base has seen significant growth. The company ended the quarter with 77.4 million paid household members, reflecting an 8% year-over-year increase. Additionally, the retailer reported a total of 138.8 million cardholders.
Overall COST ranks 2nd on our list of the restaurant and retail stocks Jim Cramer recently talked about. While we acknowledge the potential of COST as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than COST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.