Let’s have a little bit of fun here today and play the inaugural installment of the Stock Picker’s Corner (SPC) wealth builder game “Would You Rather?” Today’s contestants are me and Peter Krauth, author of The Great Silver Bull, a longtime colleague of mine who I interviewed at length back in early March. Here we go, says Bill Patalon, chief stock picker at Stock Picker’s Corner.
Costco Wholesale Corp. (COST) started selling one-ounce bars of 24-karat gold last September. With that gold bullion selling out faster than Costco could replenish its inventory, the members-only warehouse club in January diversified into silver coins. According to analysts at Wells Fargo, Costco is currently selling $100 million to $200 million worth of gold and silver a month.
One of Costco’s chief goals has been to build its digital (e-commerce) business. Now it’s using this precious-metals strategy to drive digital sales. That business unit saw sales surge 17% in December and an even-better 21% in January.
The company just boosted its quarterly cash dividend 9.4% – from $1.02 to $1.16 a share. And the digital push was a major reason why. That brings us to our game for today…
Would you rather:
- Buy 25 one-ounce Canadian Maple Leaf silver coins (assuming Costco has worked out some of the issues with coins arriving damaged and seals being broken/torn/tampered with). Reported price: $779.
- Or one share of Costco? Recent share price: $722.
Here’s what Peter had to say: “I’m quite sure Costco shares will do well, especially given the inflationary decade I believe we are in. As a weekly Costco customer myself, I’m a big fan and happy Costco member, especially because I absolutely LOVE bargains. But I do think silver will outperform Costco over the next 10 years, mostly because of a reversion to the mean.”
He goes on to cite COST’s recent P/E of 47, suggesting it’s overvalued. Meanwhile, he says silver is probably one of the cheapest assets on the planet right now. He has a target of $300 for the silver bull market.
Me? I say: “Welcome to the Whac-A-Mole Economy,” where dour-and-scared American consumers just aren’t buying the storyline that the “real” economy is strong. The “experts” say that inflation is the trigger behind the dour view that American consumers have of the US economy, their personal outlooks, and the “what comes next” for both.
Those folks are correct…sorta/kinda. It’s really about cumulative inflation – and the 20% leap in prices we’ve seen since 2020.
But what about my “Would you rather” query? I’m a “stock jockey” at heart. But I am a silver bug, too. So, I’ve been busy in both fields.
Still, my favorite game to play with wealth building stocks is the “Accumulate Game.” By that I mean I establish an investment foundation in a stock that I like for the long haul. And then I “accumulate” my way to wealth…adding to my stake as shares get cheaper…and standing pat when they’re expensive.
If I had the “accumulate” option, Costco is the kind of stock I’d accumulate my way into. With prices high, consumers will continue to flock to Costco’s basic offerings. Over time, the company’s membership model will benefit from this. Costco’s digital business is scorching hot, too.
Since the game here is either/or, I’ll grab that share of Costco and play the long-run Wealth Builder game. And I’ll look to add to that on pullbacks.
Recommended Action: Buy COST.
