Costco Investors: Don’t Overpay, Especially For Retail Stocks

Costco Wholesale (COST) is an excellent corporation. It has an extraordinary Board of Directors that includes Berkshire Hathaway Vice Chairman Charlie Munger, has grown profits by 11% annually for a decade, has 195,000 workers that generally experience better working conditions than many of their similarly situated peers, and has an excellent balance sheet that features $200 million more cash on hand than total debt obligations required (which is extraordinary for a large retail corporation). As best I can tell, it meets every characteristic of Benjamin Graham’s “Defensive Investor” checklist.

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What Does 3G Capital Teach Us About Reality?

Last March, Charlie Munger was asked about Berkshire Hathaway’s partnership with 3G Capital that has resulted in an unspecified number (estimated to be in the 4,000-8,000 range) of jobs that have been terminated as a result of 3G operators taking the helm of the combinated Kraft and Heinz. Munger responded: “What’s interesting about 3G is that they’re teaching us something about reality.” Munger didn’t offer a detailed elaboration. This begs the obvious follow-up: What’s the lesson on reality we are supposed to take from this?

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