Underestimating Costco's structural growth runway
The bull case for Costco is that traditional valuation models systematically underestimate its store density potential, international scalability, and private label strength while overestimating e-commerce threats.
The argument
The guest reflected on their firm's mistake of selling Costco too early, noting they underestimated how many stores the US market could support and how successfully the warehouse model would translate to Asian and Australian markets. Additionally, they noted that private label brand Kirkland Signature proved far more powerful and profitable than even the company's early management anticipated.
The thesis, stress-tested
✓ What validates it
- ✓Continued international store expansion success in Asia
- ✓Kirkland Signature maintaining or growing its share of total sales
▸ Risks discussed
- ▸Optically high earnings multiples
- ▸E-commerce competition from platforms like Amazon
Hear it yourself
"Chris, welcome back to excess returns. It's great to have you here. Oh, Justin Jack. I'm so glad to be here. Your firm, Davis Advisors, has been managing money and investing in companies since 1969, and you and firm have a reputation of being long term fundamentally driven investors and allocating capital to durable businesses. You know, right now, I think we're in an interesting time to have you on. The world is going through this change with AI as we were just talking about before we started here. And then you have, you know, all the other dynamics happening in the market that are on investors' mind."
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