The Motley Fool on $COST (Oct 31, 2026)
Costco has a strong competitive advantage from its subscription model, wholesale purchasing, pricing power, excellent balance sheet and high demand, and may become more important if AGI disrupts employment. The speaker forecasts about 10.5% to 11% annual return (10% plus 0.6% dividends), roughly 2.7 times in a decade. He finds that insufficient for himself and sees no informational advantage; he does not oppose staying away, and presents Costco not as a specific recommendation but as a high-quality, lower-expectation alternative to speculative small-cap and '.ai' companies for investors who find that return attractive.
Jump to any passage
I will highlight one company, Costco, which has an amazing competitive advantage : a subscription model and the ability to buy at wholesale prices. They have pricing power in their subscriptions.
They are able to raise prices . They do not do it forcefully, but rather wisely and prudently over time. They have an excellent balance sheet . There is a high demand for them.
In fact, if there are disruptions to employment, which I expect due to artificial general intelligence, companies like Costco will become more important to the average consumer looking to buy in bulk at discounted prices.
If you would like to learn more about Costco, I recommend you read some of Charlie Munger’s opinions about this business over the years. I believe Costco can achieve an annual return of 10% in addition to dividends of 0.6% annually.
Therefore, it may achieve between 10.5% and 11 % annually.
Currently, in the environment we live in, that may not seem very attractive, because this annual return of 10 to 11% would grow by about 2.7 times over a decade. So, if you have $10,000 today, you will have $27,000 in 10 years if Costco performs as I predict.
This amount seems very low. Why would I accept a return of 2.7 times? I achieved returns of 2.7 times in just 6 months. I don't want to transfer my capital to a giant, heavyweight company that everyone knows about.
There is no significant informational advantage that I can obtain regarding this company. I will not be satisfied with a return rate between 10.5% and 11% .
As you know, this is actually acceptable. If you choose to stay away from such an investment, and you are aware of it, and you have thought it through carefully, I will not oppose it.
But I think for many investors, even if you don't invest in Costco , ask yourselves at the end of this first proposal: What rate of return do I expect? What would I be happy to see?
If I could get a record annual return rate of 10.5% from Costco for the next five to ten years now, how attractive would that be to me?
So, I'm putting Costco on all of us. Not as a specific recommendation, but from a spiritual, psychological, emotional, and philosophical perspective, the danger we face now—instead of going towards high-quality companies with lower expectations, and going towards low-quality companies with higher expectations—is that some of these companies will decline by 50, 70, or 90% and will never recover.
And I think now, in addition to those basic principles in the environment we live in, it is good to look towards companies like Costco and away from small-cap IPOs or promotional companies that have a ".ai" name.
What this channel has said about $COST
The Motley Fool has 4 calls on this stock; only the adjacent ones are shown.