How Good Investing Is All About Timing
Like comedy, Cramer on Thursday said good investing is all about timing.
Take Costco Wholesale , for example. On Friday, Cramer recommended home gamers sell shares before the discount warehouse chain operator reported earnings this week. After all, he thought the stock would fall after the quarter regardless of how the results were. At that point, investors could buy the stock at discount.
Just as Cramer thought, Costco on Wednesday reported a 3 cent earnings beat and higher-than-expected earnings, too. Yet shares fell sharply, although it was able to regain some of the lost ground in trading on Thursday. As shares sold off, Cramer noted the press wrote headlines that suggested the quarter wasn't so hot. The articles mentioned concerns about the cost of goods sold or how the price of gas affected business. Reporters focused so greatly on these accounting details that they missed out on the big picture, Cramer complained.
In actuality, Cramer thinks Costco has had a huge move. Its stock ran up big going into the quarter and has a history of selling off after reporting its quarterly results, he noted. It's an established pattern that allowed Cramer to make his prediction and one that gave investors a great buying opportunity. Again, good investing is all about timing.
Speaking of timing, Cramer thinks it's a good time to invest in Costco. Despite what analysts may tell you, Cramer said the Issaquah, Wash.-based company's gross margins are fine. The retailer is also on growth mode on all fronts, he noted. Its same-store sales were up 12 percent for the quarter and the company plans to open 20 new locations yet this year. Costco plans to open another 25 new stores next year with 12 located outside the U.S. Right now, 20 percent of Costco's business is in the U.S., but the company continues to grow its international prescence.
In every region, Costco's card membership business has been one of the steadiest subscription revenue streams Cramer's seen in a while. Last quarter, membership fee income grew by 10 percent year-over-year. People are paying up for Costco's discounts, too, as the retailer recently raised its membership fee from $40 to $50. Overall, its membership renewal rate accelerated to 89.1 percent, which is the highest level in more than five years.
So what's the bottom line? Cramer recommends investors do their homework on Costco. After doing his homework on the stock, Cramer thinks it's a buy, buy, buy, especially on this pullback.
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