The bulk buying bet: Why Costco is a buy ahead of its earnings report

Investors betting on buying in bulk have been rewarded this year.

Shares of wholesale retailer Costco have jumped more than 7 percent this year, outperforming retail stocks and the broader market in that time; the S&P retail ETF (XRT) has risen more than 4 percent in 2018.

Some strategists say the stock can continue to rise when it reports earnings Thursday afternoon. Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, told CNBC's "Trading Nation" that he's bullish on Costco ahead of its earnings report. Here are his reasons why.

• In the age of e-commerce and the titan of the industry, Amazon, Costco is proving that good old-fashioned brick and mortar can still compete.

• Though the company reported same-store sales last quarter that missed analysts' estimates, e-commerce sales were up double digits for the quarter and Costco was generally seen as holdings its own in a shifting retail environment.

• Costco could benefit from rising gas prices; one technical analysis showed increasing prices at the pump bode well for the company's share price, as consumers might shop more at wholesale retailers to cut transportation costs.

• The stock is not cheap, trading at nearly 30 times trailing earnings, per FactSet data. Still, it may be a name on which to sell puts into a dip, or buy on a pullback.

Bottom line: Ahead of its earnings on Thursday, Costco shares appear well-positioned.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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