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A year ago, I made a video 
called. 

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This is the best company in the 
world. 

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It's a pretty bold statement to 
make, but I felt strongly that 

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this company is one of if not 
the best companies in the world 

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and the company in question is 
Costco the warehouse giant the 

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video went over an overview of 
what Costco actually is Costco 

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is not a simple retail company 
that sells stuff. 

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It's a warehouse company. 
That buys things on behalf of 

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its membership, they have rows 
of giant pallets of merchandise,

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Cosco's able to undercut pricing
of every competitor, by buying 

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things. 
And Of quantities, having very 

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few employees per warehouse and 
they can offer substantial 

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discounts to their members. 
I also went over the fact that 

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they are a real estate company. 
They own a ton of land and their

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land is premium real estate, 
typically in the middle of 

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highly populated high-income 
cities. 

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And I also went over the 
membership model, Costco's, not 

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just a simple retailer, they are
a membership there, a club, they

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are a subscription company with 
reoccurring, high-margin 

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Revenue, Costco's, one of those 
companies, it seems very plain. 

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Very Area on the surface, but as
far more complex, and their 

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advantages are far more nuanced,
the more you dive into the 

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company. 
Now, like I mentioned in the 

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title of this video, not only do
I talk about Costco and do 

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research on the company. 
But I've actually made pretty 

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big investments into the company
in my passive income portfolio 

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that I track publicly every 
single week, I have a category 

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of investments called consumer 
within that category. 

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I have Costco. 
This is a holding that I have 

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five thousand four hundred 
dollars of gains in and have 

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thirty six thousand dollars 
total invested in this company. 

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Any. 
Now, the interesting thing about

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this company is when I started 
buying it, Costco's one of the 

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OG Holdings. 
It's one of the originals by go 

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to my activity, history of my 
brokerage and look at my very 

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first purchases of Costco. 
The very first ones I've ever 

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done there in December 18th of 
2017. 

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December 19th, December 20th, 
December 21st. 

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I was buying this company over 
and over again in late, 2017 and

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early. 2018. 
The buys at that time, period, 

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we're at a price of a On $186 
186 Cosco currently trades at a 

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price of $487? 
That means that since early 2018

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Costco has appreciated in stock 
price by 160% 160 percent in 

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just capital gains. 
And this company has paid 

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dividends every single quarter 
of the way. 

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So the returns of my initial 
investments in the Costco have 

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been phenomenal, the rate of 
return When I was first buying 

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Costco, in 2018 has out, 
Outpaced the S&P 500 by over 

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double compounding at 22 percent
compared to the S&P 500's 9.7%. 

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And since those initial 
purchases back in 2018, I've 

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been adding to this position 
buying more and more of Costco 

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virtually any time, the company 
dips any time, the price goes 

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down temporarily, I buy more of 
it and that's what I want to 

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talk about. 
Today is Costco still the great 

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investment that it was five 
years ago. 

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So obviously we have a lot to 
get to in this episode. 

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Let's go ahead and Jump Right 
In. 

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And before we talk about Costco 
specifically, and I dive into my

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thoughts on the company, their 
most recent earnings report and 

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what I plan on doing in the 
future with them, I want to just

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do a quick review of My overall 
strategy because Costco, only 

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makes sense. 
If you actually look at my 

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overall investing strategy, what
we're looking at is the passive 

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income portfolio. 
This is my primary investment 

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vehicle. 
This is where I'm trying to grow

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wealth as fast as possible. 
I've developed a strategy where 

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I'm investing in companies that 
I consider to be compounding 

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machines. 
These These aren't your average 

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companies. 
These ones are typically 

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monopolies and highly 
concentrated Industries with 

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high barriers of Entry. 
Their companies have significant

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growth significant pricing 
power. 

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I invest in these companies and 
I make concentrated positions 

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into the ones that I think are 
the best companies over time as 

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I've developed. 
And optimize the strategy. 

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My portfolio has become more and
more concentrated and I can 

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throw up on the screen. 
My core Holdings. 

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These are my nine core 
positions, currently, Lee. 

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I have nine positions that make 
up over 80% of my money 

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invested, these nine companies 
are it. 

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This is the passive income 
portfolio. 

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This is 80% of the invested 
Capital. 

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Most of these positions are over
10 percent of the portfolio when

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I look at it I organized it from
left to right from my oldest 

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positions, the ogs all the way 
over to the newer ones that I've

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welcome to the portfolio as new 
concentrated positions. 

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At the very left we have apple. 
This is a company that's widely,

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outperform the market. 
Good. 

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I mean the green right now, by 
sixteen thousand dollars. 

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This one is done. 
Terrific. 

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After Apple, we have Microsoft. 
That's one of the only original 

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companies that I'm currently in 
the red on and it's one of the 

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ones where I think it's heavily 
undervalued. 

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In my opinion, I'll be in the 
red of Microsoft for short 

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amount of time. 
After that, of course we have 

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CostCo. 
Then we have Vici another 

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company that I invested in 
around two years ago when I'm in

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the green twelve thousand 
dollars in that one, then we 

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have Texas Roadhouse. 
This is another one that I 

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invested in around two years 
ago. 

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In the green. 8600 after that, 
we have for new companies, SP 

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Global, MasterCard, Canadian 
Pacific and Union Pacific. 

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The railroads combined make up 
about 10% and then I have over 

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10 percent in Sp Global and 
MasterCard. 

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Now, the performance of them are
all around flat. 

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I put new because these are ones
that I invested in this year. 

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There are new core Holdings and 
I think we're going to see the 

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same thing over time. 
I think we'll see the intrinsic 

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value increased and these 
companies compound as well, but 

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this is the portfolio. 
As of now, these are my 

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concentrated core positions, 
each one of them is incredibly 

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meaningful to the Future 
performance of my portfolio and 

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basically my strategy is very 
simple, whatever one of these 

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companies in a dip that's where 
my future cash flow. 

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That's where my reinvested 
dividends go. 

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I reinvest back into whatever 
company is going through the 

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biggest dip. 
Now, if you want to follow along

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and see how this turns out, see 
how this strategy evolves and 

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performs over time, I'm also 
tracking my I'll be showing you 

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compared to the S&P 500. 
How this works out. 

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Now let's go ahead and jump into
Costco, like I said, this is a 

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company that I've owned for 
years. 

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I've owned it for over five 
years now. 

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And my initial purchases of the 
company are up 160 percent, but 

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Ivan, adding to this position, 
every single year, anytime the 

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company dips, I've been buying 
more right now. 

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I'm in the green by around five 
thousand four hundred dollars. 

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So for me with my inflows of 
cash, this is Been a widely 

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Market outperforming company and
a lot of investors are wondering

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if now's a good time to get into
Costco. 

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So let's go ahead and take a 
look at that. 

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We can use quantum.com. 
This is a website that I've 

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developed its included as part 
of the patreon membership, $10 a

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month with a free trial, try it 
out with a patreon link in the 

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description below. 
If we look at the price of 

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Costco, over the past six 
months, it's down 8% and that's 

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a typical of this compound and 
Company. 

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It typically doesn't go down for
six months at a time. 

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If we go to Past year, it's 
down, eight percent over the 

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past year. 
Another thing that's not typical

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for this, compound, and Company 
now granted, this isn't too bad 

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compared against the S&P 500, 
but Costco has showed a little 

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weakness. 
Nonetheless, when we look over 

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two years it's up 56% in. 
This is the type of thing. 

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You see with Costco over small 
periods of time. 

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It can look like the company's 
going through trouble over any 

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longer period of time. 
It is a compounding monster. 

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Now, let's go back to the The 
two year time Horizon here. 

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If I look at this, we see it 
just zigging and zagging. 

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The price went up to five 
seventy, then down to 470, then 

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back up to $600, then back to 
$400, then back up to 550, then 

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down to 450 then back up to 500,
then back to 450 so on and so 

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forth. 
Now, I'm sure there's some 

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technical analysis on this. 
I'm sure some people will be 

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drawing more lines and saying 
how it's going to go up or down 

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based on this. 
That's a question for You can 

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still look at, which is not my 
specialty. 

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I invest in these companies 
based off their intrinsic, 

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fundamental value. 
And before we jump into the 

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valuation, I want to look at 
some of the fundamentals and see

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what's been going on with the 
company over the past couple of 

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years. 
So, let's start off looking at 

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the fundamentals with the 
revenue chart. 

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The top line, revenue growth, or
sales growth of the company is 

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astronomical. 
And this is something that I 

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think Costco does not get enough
credit for it. 

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You see companies like a zoom or
even companies like Apple and 

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Google and meta and everyone 
talks about Those type of tech 

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companies. 
As being growth companies, 

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Costco has grown faster than all
of those companies over the past

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year and over the past 10 years 
and 20 years it's been a growth 

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monster. 
We have the numbers all the way 

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back to 1985 since then the 
growth is steady, consistent and

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fast. 
This is a Growth Company, 

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there's no other way around. 
It Costco grew its Revenue by 

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15% year over year over the past
five years. 

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Grown at 12%, it goes through 
times where it slows down a 

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little bit if the economy slows 
down but it's actually less 

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cyclic called than the General 
market. 

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So, even during time periods, 
like the Great Recession in 

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2009, Costco's sales went down a
tiny amount. 

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It barely stayed flat and 
the.com, bubble Costco, sales 

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grew. 
So this company is a fantastic 

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Growth Company. 
It still grows today and the 

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growth has actually picked up 
and Pace over the past year. 

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Now, when I purchase Costco, 
back in 2017, That was right 

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here. 
So here's 2017. 

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This is the year that I made the
first purchase of it since 2017.

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We actually look at the number 
here. 

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They did 129 billion dollars 
that year since then they've 

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increased from 129 billion to 
226 billion. 

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So 129 2226 they've around 
doubled the amount of Revenue 

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over the past five years. 
So again, I bought this retail 

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company that was already really.
Big and lots of people sing. 

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The growth was saturated. 
Costco is a slower-moving 

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company and the revenue has 
doubled over the past five 

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years. 
That's pretty quick growth. 

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And keep in mind that they grew 
the revenue. 

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This quickly organically, they 
haven't done major Acquisitions,

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they haven't been diluting 
shareholders to buy company. 

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After company, this is just 
Costco, just the warehouse. 

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That's the only way that they're
growing is through their 

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warehouse and through their 
online sales, they are not 

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buying up companies doing 
terrible. 

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Acquisitions at high prices to 
grow their top line revenue. 

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This is all organic growth, 
which makes it even more 

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meaningful. 
Now, next we look at the 

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actually, but of the company 
importantly, Costco, converts 

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their revenue, growth to even 
faster, ibadah growth. 

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So you see these numbers are 
actually faster Pace than the 

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actual Revenue. 
Next up, we have the free cash 

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flow of the company. 
When you looking at free cash 

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flow, this number is the amount 
of operating income the company.

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Generates subtracting out, the 
capex of the company. 

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The capex is the amount of Money
they spend on building new 

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warehouses, buying new shipping 
trucks. 

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So if they stopped building new 
warehouses, that free cash flow 

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would go up as a result. 
Now, we look at this and we see 

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that over the past five or six 
years. 

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They went from a level of around
2 billion and they've doubled 

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that to around 4 billion that's 
the level that they're at. 

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So they've doubled the amount of
free cash flow over the past 

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five to six years. 
In my opinion, I think the free 

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cash flow will continue to grow 
at an even accelerated pace. 

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And I'll Plane that more in the 
future. 

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But I actually think that the 
free cash flow is going to be 

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six to eight billion dollars 
over the next five years. 

228
00:11:36,800 --> 00:11:38,900
Now, we can factor in stock 
based compensation. 

229
00:11:39,200 --> 00:11:41,700
This is the amount of money that
they dilute shareholders to pay 

230
00:11:41,700 --> 00:11:45,200
their employee in stock from a 
shareholder perspective. 

231
00:11:45,200 --> 00:11:49,000
It does not matter what you pay 
your employee, it's all value 

232
00:11:49,000 --> 00:11:52,400
lost for the shareholder value, 
transferred from the shareholder

233
00:11:52,400 --> 00:11:55,400
to the employees. 
So whether they pay in cash, or 

234
00:11:55,400 --> 00:11:58,000
they pay in stock, that is 
money, going from the 

235
00:11:58,000 --> 00:12:00,600
shareholder to the employee. 
This case, I think they're 

236
00:12:00,600 --> 00:12:02,900
stock-based Compass completely 
reasonable. 

237
00:12:03,000 --> 00:12:06,100
So I think their free cash flow 
profile overall looks very good.

238
00:12:06,100 --> 00:12:08,900
Now we look at the net income of
the company, this is another way

239
00:12:08,900 --> 00:12:12,100
of measuring the profitability 
of the company, but this also 

240
00:12:12,100 --> 00:12:14,800
brings in and expenses and it's 
a different way of accounting 

241
00:12:14,800 --> 00:12:16,800
for it than the cash flow 
statement. 

242
00:12:17,000 --> 00:12:20,100
When we look at the net income, 
we see that Costco's one of the 

243
00:12:20,100 --> 00:12:23,300
companies where the actual 
profitability of the company 

244
00:12:23,300 --> 00:12:25,500
grows faster than their top line
revenue. 

245
00:12:25,800 --> 00:12:29,600
For example the net income over 
the past five years has grown at

246
00:12:29,700 --> 00:12:31,800
17 percent over the past 10 
years. 

247
00:12:31,800 --> 00:12:34,900
It's grown at 13 percent that is
outpacing. 

248
00:12:34,900 --> 00:12:37,700
Its total revenue growth. 
So they have a very good 

249
00:12:37,700 --> 00:12:41,300
conversion of Revenue to 
profitability and then finally 

250
00:12:41,300 --> 00:12:42,800
we look at the earnings per 
share. 

251
00:12:43,200 --> 00:12:45,600
This is of course the metric 
every investors looking at 

252
00:12:45,600 --> 00:12:48,100
during the earnings time how 
much was their earnings per 

253
00:12:48,100 --> 00:12:50,600
share? 
Costco's a company that again. 

254
00:12:50,600 --> 00:12:53,100
You look at these charts and 
it's just phenomenal. 

255
00:12:53,300 --> 00:12:57,500
Every single chart is as if you 
went in and just drew lines of 

256
00:12:57,500 --> 00:13:01,600
the perfect company, everyone, 
Them is up and to the right 

257
00:13:01,800 --> 00:13:06,100
every single chart shows a 
consistent very predictable, 

258
00:13:06,200 --> 00:13:08,700
intrinsic compounding. 
The intrinsic value of this 

259
00:13:08,700 --> 00:13:12,700
company increases every single 
year marching higher and higher 

260
00:13:12,800 --> 00:13:14,800
every single year. 
And importantly, another thing 

261
00:13:14,800 --> 00:13:17,800
to mention with the earnings per
share of this company and a lot 

262
00:13:17,800 --> 00:13:20,100
of things that I think newer 
investors miss when they're 

263
00:13:20,100 --> 00:13:23,700
looking at new Investments is 
it's not just about how quickly 

264
00:13:23,700 --> 00:13:25,600
a company can grow its earnings 
per share. 

265
00:13:25,800 --> 00:13:27,800
That's not the most important 
measurement. 

266
00:13:27,900 --> 00:13:31,600
The most important measurement 
is how Consistently and quickly 

267
00:13:31,600 --> 00:13:33,200
a company can grow its earnings 
per share. 

268
00:13:33,200 --> 00:13:38,000
Consistently is more important 
than how quickly for example, if

269
00:13:38,000 --> 00:13:41,200
we compare this earnings per 
share chart to a company, like 

270
00:13:41,200 --> 00:13:44,600
AMD, that's another company 
that's considered a Growth 

271
00:13:44,600 --> 00:13:46,700
Company. 
One growing much faster than 

272
00:13:46,700 --> 00:13:49,100
Costco, right? 
What we look at that earnings 

273
00:13:49,100 --> 00:13:51,000
per share chart, and this is 
what it looks like. 

274
00:13:51,008 --> 00:13:56,100
Now, if you just erased history 
and you didn't study any of the 

275
00:13:56,100 --> 00:13:58,900
history of the company and 
you're focused on maybe just a 

276
00:13:58,900 --> 00:14:01,200
past couple of years. 
Here's your new investor that 

277
00:14:01,200 --> 00:14:03,100
started investing in the past 
four years. 

278
00:14:03,500 --> 00:14:06,800
This is what it looks like. 
Wow, this company grew its 

279
00:14:06,800 --> 00:14:10,100
earnings per share by 10x over 
the past year. 

280
00:14:10,400 --> 00:14:13,000
That's amazing. 
You might be really happy right 

281
00:14:13,000 --> 00:14:16,000
here, but what you miss out if 
you're zoomed in on just the 

282
00:14:16,000 --> 00:14:19,700
most recent years is studying 
the history of the company and 

283
00:14:19,700 --> 00:14:23,600
knowing what you're invested in,
AMD has a long history of being 

284
00:14:23,600 --> 00:14:27,600
a highly cyclical company, with 
unpredictable earnings, That 

285
00:14:27,600 --> 00:14:29,600
Swing negative, and positive 
over time. 

286
00:14:29,700 --> 00:14:31,000
Time. 
So even though the earnings 

287
00:14:31,000 --> 00:14:35,400
growth was fantastic from 2018 
to 2020, look how short live. 

288
00:14:35,400 --> 00:14:38,800
That was now the earnings per 
share are going back down and 

289
00:14:38,800 --> 00:14:41,600
2022. 
And this follows the long-term 

290
00:14:41,600 --> 00:14:45,300
history, someone were looking at
companies, it is important to 

291
00:14:45,300 --> 00:14:48,900
have their 20-year history. 
This can better inform your 

292
00:14:48,900 --> 00:14:52,200
decisions of future Investments 
when I'm looking at Costco and 

293
00:14:52,200 --> 00:14:54,900
assessing the intrinsic value. 
I know that the company is 

294
00:14:54,900 --> 00:14:58,300
increasing its intrinsic value 
over time because it doesn't 

295
00:14:58,300 --> 00:15:01,800
give up its game. 
It makes gains and then it keeps

296
00:15:01,800 --> 00:15:04,600
them at worst. 
It might stay flat for a year 

297
00:15:04,900 --> 00:15:08,500
that's acceptable, what's not 
acceptable as the company being 

298
00:15:08,500 --> 00:15:11,200
completely unpredictable. 
And that's something that you do

299
00:15:11,200 --> 00:15:13,700
not get with Costco. 
Now, of course, after looking at

300
00:15:13,700 --> 00:15:16,600
the organic growth and their 
revenue, the incredibly fast 

301
00:15:16,600 --> 00:15:18,600
growth and ibadah free cash 
flow. 

302
00:15:18,600 --> 00:15:23,200
Net income and earnings per 
share this company so far, looks

303
00:15:23,200 --> 00:15:26,700
like an overall growth monster. 
That's what we're looking at a 

304
00:15:26,700 --> 00:15:30,400
compounding machine. 
Every single metric Every single

305
00:15:30,400 --> 00:15:32,700
proxy that you can measure the 
growth of a company. 

306
00:15:32,800 --> 00:15:36,200
Costco has it and they pass this
test with flying colors. 

307
00:15:36,400 --> 00:15:40,200
This is a company with a long 
robust history of provable 

308
00:15:40,200 --> 00:15:43,300
growth after that, we look at 
the health of the company and we

309
00:15:43,308 --> 00:15:45,600
do that by assessing the current
balance sheet. 

310
00:15:45,700 --> 00:15:48,000
Now looking at the balance 
sheet, this is another scenario 

311
00:15:48,000 --> 00:15:50,200
where I like to look at the 
long-term history of the 

312
00:15:50,200 --> 00:15:53,400
company, the both gauge the 
decisions that the management 

313
00:15:53,400 --> 00:15:57,100
has made and if the company 
likes to lever up and debt or if

314
00:15:57,100 --> 00:15:59,500
they like to keep a lot of cash,
what type of company? 

315
00:15:59,700 --> 00:16:03,300
Is this when I look at Costco, I
look at the cache verse that 

316
00:16:03,300 --> 00:16:06,900
debt over time. 
And I notice that, basically, at

317
00:16:06,900 --> 00:16:11,600
all times starting from 2002, 
the cash is higher than the 

318
00:16:11,608 --> 00:16:13,400
dead. 
Don't you notice that when you 

319
00:16:13,400 --> 00:16:15,500
look at it, the green is the 
cash. 

320
00:16:15,500 --> 00:16:18,700
And the red is the debt since 
2002. 

321
00:16:18,900 --> 00:16:22,800
The cash has always been higher 
than the dead before that you 

322
00:16:22,800 --> 00:16:26,300
had more debt than cash. 
So this was in the very early 

323
00:16:26,300 --> 00:16:28,500
stages of the company. 
They probably had some 

324
00:16:28,500 --> 00:16:30,900
investment money they had. 
Add a little bit of debt and as 

325
00:16:30,900 --> 00:16:34,800
soon as the company became very 
profitable they said no more. 

326
00:16:34,800 --> 00:16:38,400
We're going to run this company 
very conservatively, and that is

327
00:16:38,400 --> 00:16:41,700
a deliberate decision. 
Look how many companies do not 

328
00:16:41,700 --> 00:16:44,600
run this way, they run with more
debt than cash. 

329
00:16:44,900 --> 00:16:48,100
Now, even when we factor in 
their Capital lease obligations,

330
00:16:48,500 --> 00:16:50,400
which is another form of 
obligation. 

331
00:16:50,400 --> 00:16:53,300
It's kind of another form of 
debt, but it's not exactly the 

332
00:16:53,300 --> 00:16:56,600
same as long-term debt. 
Even when we factor that in, 

333
00:16:56,800 --> 00:16:59,500
they still have more cash than 
debt. 

334
00:16:59,900 --> 00:17:03,800
This is a completely unindicted 
company unlevered, which tells 

335
00:17:03,800 --> 00:17:07,200
me a bit of information. 
First of all, companies that 

336
00:17:07,200 --> 00:17:11,800
have zero dollars in debt, are 
simply less risky than companies

337
00:17:11,800 --> 00:17:14,099
that have dead that is just the 
first. 

338
00:17:14,099 --> 00:17:17,099
Take away all else. 
Equal a company that has less 

339
00:17:17,099 --> 00:17:19,700
debt is far less risky than a 
one that doesn't. 

340
00:17:19,900 --> 00:17:22,099
So when I look at Costco, that's
a big positive. 

341
00:17:22,099 --> 00:17:25,599
I know that this company and the
management of it are not taking 

342
00:17:25,599 --> 00:17:27,900
risks with their financial 
situation. 

343
00:17:28,000 --> 00:17:30,900
They're not taking risks with 
their It's sheet and a lot of 

344
00:17:30,900 --> 00:17:33,500
companies. 
Again, they do take risks, they 

345
00:17:33,500 --> 00:17:36,100
like to take out debt. 
I can give you a for instance. 

346
00:17:36,300 --> 00:17:39,100
Let's go ahead and take a look 
at Domino's by comparison. 

347
00:17:39,200 --> 00:17:42,400
This is a company that has a 
great business model. 

348
00:17:42,400 --> 00:17:46,600
Domino's is a fantastic business
as a franchise food, operator, 

349
00:17:47,000 --> 00:17:50,300
But Domino's has a different 
Capital, allocation strategy. 

350
00:17:50,600 --> 00:17:53,900
This is a different decision by 
management, they do things. 

351
00:17:54,100 --> 00:17:58,000
In fact, the exact opposite of 
Costco, they always have a lot 

352
00:17:58,000 --> 00:18:01,600
more debt than cash. 
I can barely even see the amount

353
00:18:01,600 --> 00:18:03,800
of cash they have. 
And one thing that they've 

354
00:18:03,800 --> 00:18:07,400
decided to do over the past 
seven or eight years is to 

355
00:18:07,400 --> 00:18:11,600
increase the amount of debt 
every single year and use that 

356
00:18:11,600 --> 00:18:15,300
money to buy back shares. 
So they're taking out debt. 

357
00:18:15,300 --> 00:18:18,300
And they're using that cash to 
do levered BuyBacks. 

358
00:18:18,700 --> 00:18:20,700
Why does Domino's management do 
that? 

359
00:18:20,900 --> 00:18:24,800
Because it makes the earnings 
per share grow at a faster rate.

360
00:18:25,300 --> 00:18:30,500
So, this is a form of, I think, 
decent Financial Engineering the

361
00:18:30,500 --> 00:18:33,600
company taking out debt at a 
very low interest rate to buy 

362
00:18:33,600 --> 00:18:36,800
back shares at a very cheap 
price, which increases the 

363
00:18:36,800 --> 00:18:39,600
earnings per share and overall 
increases the value to the 

364
00:18:39,600 --> 00:18:42,400
shareholder. 
But the consequence of this 

365
00:18:42,400 --> 00:18:45,900
action is that after you've done
that for a long period of time 

366
00:18:46,100 --> 00:18:48,500
and the environment changes 
where we have higher interest 

367
00:18:48,500 --> 00:18:51,200
rates and now to take out new 
debt or renew the debt, you 

368
00:18:51,200 --> 00:18:54,100
have, you're doing it at a much 
higher cost of capital. 

369
00:18:54,500 --> 00:18:57,400
So, Domino's is not going to be 
able to do this same thing 

370
00:18:57,400 --> 00:19:00,700
perpetually and now they're in a
situation Somewhere they have 

371
00:19:00,900 --> 00:19:05,800
currently, around five billion 
dollars of debt, they have 60 

372
00:19:05,800 --> 00:19:09,100
million dollars in cash. 
And the five billion dollars of 

373
00:19:09,100 --> 00:19:12,700
debt is around five to six times
what they made in ibadah in 

374
00:19:12,700 --> 00:19:15,700
2022. 
So this would take them at 

375
00:19:15,700 --> 00:19:18,800
minimum, five years to pay off 
that debt. 

376
00:19:19,100 --> 00:19:21,300
This is a company, that's highly
levered. 

377
00:19:21,300 --> 00:19:23,900
And again when we bring back up,
Costco, and we look at the 

378
00:19:23,908 --> 00:19:28,000
balance sheet here, management 
could do the same thing, they 

379
00:19:28,000 --> 00:19:31,300
could easily take out. 
Out billions and billions of 

380
00:19:31,308 --> 00:19:34,300
dollars in debt Costco's very 
credit worthy. 

381
00:19:34,300 --> 00:19:37,300
They simply won't do it. 
The management does not care 

382
00:19:37,300 --> 00:19:40,400
about short-term gains with the 
company and they're certainly 

383
00:19:40,400 --> 00:19:43,700
never going to put the company 
in financial Jeopardy by 

384
00:19:43,700 --> 00:19:47,400
manufacturing, short term gains.
And this again is a trade-off. 

385
00:19:47,400 --> 00:19:49,400
You can probably find companies 
that you'll get better 

386
00:19:49,400 --> 00:19:52,200
short-term results. 
But it's difficult to beat this 

387
00:19:52,200 --> 00:19:56,000
strategy long-term, because when
you reduce risk, you reduce the 

388
00:19:56,000 --> 00:19:59,000
long-term chance of this company
ever running into trouble. 

389
00:19:59,000 --> 00:20:01,200
Some we look at the Balance 
sheet and we put that in 

390
00:20:01,200 --> 00:20:04,400
contrast with the rest of the 
company's growth, I think it 

391
00:20:04,400 --> 00:20:07,700
makes it all the more impressive
not only are they growing their 

392
00:20:07,700 --> 00:20:10,600
revenue but they're growing. 
It organically without doing 

393
00:20:10,600 --> 00:20:13,700
major Acquisitions, lots of 
companies can bump up the 

394
00:20:13,700 --> 00:20:17,700
revenue like Disney did by 
buying major assets like the fox

395
00:20:17,700 --> 00:20:20,400
deal, but when they do that, 
they have to pay a price. 

396
00:20:20,700 --> 00:20:23,600
They take out a lot of debt. 
They issue a lot of shares. 

397
00:20:23,900 --> 00:20:27,600
In the case of Costco, all of 
this growth is organic. 

398
00:20:27,600 --> 00:20:29,800
Now, if we look at how this 
company returns cash, Back to 

399
00:20:29,808 --> 00:20:32,300
the shareholder. 
We can look at the dividends and

400
00:20:32,300 --> 00:20:34,500
the share BuyBacks. 
Let's go ahead and first start 

401
00:20:34,500 --> 00:20:37,200
off with the dividends. 
This charts thrown off a little 

402
00:20:37,200 --> 00:20:40,200
bit by two major dividends. 
These are special dividends 

403
00:20:40,200 --> 00:20:44,000
here, five dollars in 2013 or 
2014. 

404
00:20:44,400 --> 00:20:48,700
And then we have another seven 
dollar special dividend in 2017.

405
00:20:49,200 --> 00:20:51,900
They do this surround every five
or six years. 

406
00:20:52,000 --> 00:20:55,400
If Costco gets too much cash and
they don't have much to do with 

407
00:20:55,400 --> 00:20:57,900
it, they're going to return it 
back to the shareholder. 

408
00:20:57,900 --> 00:21:00,200
Either through, share BuyBacks 
or Evidence. 

409
00:21:00,500 --> 00:21:02,900
And in my opinion, I think we 
could see another special 

410
00:21:02,900 --> 00:21:07,400
dividend in 2023 or 2024. 
Now if we look at this without 

411
00:21:07,400 --> 00:21:09,900
those special dividends this is 
what the dividend history looks 

412
00:21:09,900 --> 00:21:11,800
like. 
It's very impressive. 

413
00:21:11,800 --> 00:21:14,800
They grow at around 10 to 12 
percent per year, they've done. 

414
00:21:14,800 --> 00:21:18,200
So for the past 20 years, 
another way a company can return

415
00:21:18,200 --> 00:21:21,000
money back to the shareholder is
through share BuyBacks. 

416
00:21:21,400 --> 00:21:23,600
This is a point that I don't 
like about Costco. 

417
00:21:24,200 --> 00:21:26,400
A lot of the companies that I'm 
investing in do, very 

418
00:21:26,400 --> 00:21:29,800
aggressive, share, BuyBacks by 
reducing the amount of Shares 

419
00:21:29,800 --> 00:21:33,500
outstanding that increases your 
ownership in the company Costco 

420
00:21:33,500 --> 00:21:36,200
really has not done that for a 
long period of time. 

421
00:21:36,600 --> 00:21:41,000
Since around 2006, the share 
count has remained mostly flat, 

422
00:21:41,400 --> 00:21:44,000
very flattish which means 
they're just buying back enough 

423
00:21:44,000 --> 00:21:46,300
shares to pay their stock based 
compensation. 

424
00:21:46,700 --> 00:21:49,000
So they're making it so that 
they're not diluting you but 

425
00:21:49,000 --> 00:21:51,400
they're also not increasing your
interest in the business by 

426
00:21:51,400 --> 00:21:53,900
reducing the amount of shares 
outstanding overall. 

427
00:21:53,900 --> 00:21:57,000
I like the capital return policy
of the company paying out 

428
00:21:57,000 --> 00:22:00,900
dividends every single quarter 
and then giving you Very lofty. 

429
00:22:01,100 --> 00:22:03,600
Big special dividends when they 
have too much cash. 

430
00:22:03,900 --> 00:22:06,400
And in the meantime they're not 
deluding you because they buy 

431
00:22:06,400 --> 00:22:08,900
back just enough shares to 
offset dilution. 

432
00:22:09,200 --> 00:22:12,400
I think overall it's a very 
smart way to return Capital back

433
00:22:12,400 --> 00:22:15,000
to the shareholder. 
The next thing that I look at is

434
00:22:15,000 --> 00:22:17,000
the actual ratios of the 
company. 

435
00:22:17,300 --> 00:22:20,200
The return on Capital employed. 
This is very similar to the 

436
00:22:20,200 --> 00:22:23,500
return on invested capital and 
another similar metric. 

437
00:22:23,500 --> 00:22:26,600
That Warren Buffett looks at 
which is Returns on tangible 

438
00:22:26,600 --> 00:22:28,800
assets. 
Basically, you're looking at how

439
00:22:28,800 --> 00:22:31,800
effective the company is at 
using the money that it has, 

440
00:22:32,100 --> 00:22:36,000
Costco is very consistent like 
everything else in this 

441
00:22:36,000 --> 00:22:38,000
business. 
It is consistent. 

442
00:22:38,300 --> 00:22:41,500
The Returns on Capital employed 
are not the highest of any 

443
00:22:41,500 --> 00:22:43,200
company. 
There's other ones that have 

444
00:22:43,200 --> 00:22:46,800
much higher are oce, but 
Costco's are decent there in 

445
00:22:46,808 --> 00:22:51,200
these 17 to 25 percent range and
they're incredibly consistent 

446
00:22:51,200 --> 00:22:54,000
and they're continuing to grow 
over time as a company, has 

447
00:22:54,000 --> 00:22:56,600
become more optimized. 
Now, finally, the last thing 

448
00:22:56,600 --> 00:23:00,000
that I'd look at with Costco is 
the expenses of the Company. 

449
00:23:00,300 --> 00:23:02,700
They don't have much General, 
administrative research and 

450
00:23:02,700 --> 00:23:04,500
development. 
They don't have any sales and 

451
00:23:04,500 --> 00:23:07,800
marketing but they do have capex
to build new warehouses. 

452
00:23:08,000 --> 00:23:11,500
You can see the capex going up 
over time as they spend an 

453
00:23:11,500 --> 00:23:14,600
increasing amount of money 
building, 20 to 25 new 

454
00:23:14,600 --> 00:23:18,000
warehouses per year. 
What I'll say about this is, 

455
00:23:18,200 --> 00:23:22,000
there's a misconception going on
with different companies, like 

456
00:23:22,000 --> 00:23:26,000
Costco and their future growth. 
A lot of people think that 

457
00:23:26,000 --> 00:23:28,700
there's already a lot of 
Costco's in the US. 

458
00:23:29,000 --> 00:23:32,300
So when they eventually hit 
saturation and they have no more

459
00:23:32,300 --> 00:23:35,200
warehouses to build in the US 
because they're already super 

460
00:23:35,200 --> 00:23:37,200
saturated. 
That means that the company 

461
00:23:37,200 --> 00:23:39,600
won't grow anymore. 
What are they going to do? 

462
00:23:39,600 --> 00:23:42,500
That is a misconception. 
That's not an accurate way of 

463
00:23:42,500 --> 00:23:45,600
looking at it. 
Even when Costco hits saturation

464
00:23:45,600 --> 00:23:49,400
of having too many warehouses in
the u.s., I think the revenue 

465
00:23:49,400 --> 00:23:52,400
will continue to grow at the 
exact same rate and I have an 

466
00:23:52,400 --> 00:23:54,400
example of this same thing 
happening. 

467
00:23:54,400 --> 00:23:57,300
We can look at the actual store 
count of a company Like Home 

468
00:23:57,300 --> 00:24:04,200
Depot in 2011, Home Depot. 
At 1974 locations in the US in 

469
00:24:04,200 --> 00:24:10,000
2021 a full decade later, they 
had 2006 locations. 

470
00:24:10,600 --> 00:24:16,400
Again, that's going from 1974 to
2006. 

471
00:24:16,700 --> 00:24:21,400
So they opened up around 30 to 
40 new locations in a 10-year 

472
00:24:21,800 --> 00:24:23,700
period. 
It's almost nothing. 

473
00:24:23,700 --> 00:24:26,300
That's like an increase of a 
couple percentage points there. 

474
00:24:26,300 --> 00:24:29,400
The store count of Home Depot 
has remained flat over the past.

475
00:24:29,500 --> 00:24:32,100
Decade, but we can look at Home.
Depot's Revenue over the past 

476
00:24:32,100 --> 00:24:34,200
decade, and let's just take a 
glance here. 

477
00:24:34,500 --> 00:24:37,900
This is from 2011. 
To current day, the revenue has 

478
00:24:37,900 --> 00:24:40,500
gone from seventy billion 
dollars to a hundred and sixty 

479
00:24:40,500 --> 00:24:43,800
billion dollars. 
With basically zero news stores 

480
00:24:43,800 --> 00:24:46,400
added, they grew their revenue 
by double. 

481
00:24:46,400 --> 00:24:49,000
In fact, it's been one of the 
best growth decades for Home 

482
00:24:49,000 --> 00:24:50,600
Depot. 
So, keep that in mind. 

483
00:24:50,600 --> 00:24:54,000
When people say, what happens 
when Costco's saturated with, in

484
00:24:54,000 --> 00:24:56,100
the US, the company will cease 
to grow. 

485
00:24:56,400 --> 00:24:58,900
That's not accurate. 
The company has many levers of 

486
00:24:58,900 --> 00:25:01,500
growth. 
And opening up a new stores is 

487
00:25:01,500 --> 00:25:04,400
just one lever of growth. 
Now, even if the company becomes

488
00:25:04,400 --> 00:25:07,400
saturated in the u.s., one of 
the great things about Costco, 

489
00:25:07,400 --> 00:25:11,100
that hasn't been the case with 
many other retailers is Costco, 

490
00:25:11,100 --> 00:25:14,300
is beloved by basically every 
other country and every other 

491
00:25:14,300 --> 00:25:17,800
culture, whether it's Japan, 
whether it's all of Europe, 

492
00:25:17,800 --> 00:25:20,900
whether it's even China, China 
is one of the new growth pass 

493
00:25:20,900 --> 00:25:22,900
for Costco. 
They've already opened up a 

494
00:25:22,908 --> 00:25:26,800
couple new locations and they're
basically flooded with people 

495
00:25:26,800 --> 00:25:29,200
all the time. 
The amount of members they have 

496
00:25:29,200 --> 00:25:32,400
our Around five times the 
average of a location in the 

497
00:25:32,400 --> 00:25:34,200
u.s. 
Costco assesses that. 

498
00:25:34,200 --> 00:25:37,700
Their demand is so immense that 
could basically open up hundreds

499
00:25:37,700 --> 00:25:40,700
of new locations in China and 
have all of them have more 

500
00:25:40,700 --> 00:25:43,100
membership than current u.s. 
locations. 

501
00:25:43,600 --> 00:25:46,600
So this is a company that has 
endless amounts of growth with 

502
00:25:46,600 --> 00:25:49,500
its locations all across the 
globe and it's one. 

503
00:25:49,500 --> 00:25:52,100
That's also very unpalatable 
Costco's. 

504
00:25:52,100 --> 00:25:54,000
Not a company that gets in a lot
of trouble. 

505
00:25:54,000 --> 00:25:57,300
It's a very mundane company, so 
it's not one that I think would 

506
00:25:57,300 --> 00:25:59,400
get in the midst of us and 
China. 

507
00:25:59,500 --> 00:26:01,600
Relationship. 
It's a company that stays very 

508
00:26:01,600 --> 00:26:05,300
low-key, so Costco does have a 
lot of store growth ahead of it.

509
00:26:05,300 --> 00:26:08,500
I think they're going to 
continue to open up 20 to 25 new

510
00:26:08,500 --> 00:26:12,600
locations per year for the 
long-term foreseeable future. 

511
00:26:13,000 --> 00:26:17,200
But even if they didn't, even if
Costco never opened up, a new 

512
00:26:17,200 --> 00:26:21,300
location again, I still believe 
it would remain one of the best 

513
00:26:21,300 --> 00:26:24,400
growth companies in the market. 
Here's a chart that Costco puts 

514
00:26:24,400 --> 00:26:27,500
together on their 10K, this is 
their annual report. 

515
00:26:27,600 --> 00:26:30,300
You have to dig down way deep 
into the report to find this 

516
00:26:30,300 --> 00:26:34,200
information but they show her is
a number of locations that they 

517
00:26:34,200 --> 00:26:38,500
opened up every single year and 
then the average revenue, the 

518
00:26:38,500 --> 00:26:43,000
average sale per Warehouse from 
that location by year. 

519
00:26:43,000 --> 00:26:47,700
For example, we can go all the 
way back to 2014 in 2014. 

520
00:26:47,700 --> 00:26:53,000
Costco opened up 30 warehouses 
so, 30, new locations and 2014. 

521
00:26:53,400 --> 00:26:58,700
And on average, they averaged 
108 million dollars in sales per

522
00:26:58,700 --> 00:27:02,100
location. 
So 108 the first year that they 

523
00:27:02,100 --> 00:27:05,700
opened in 2014. 
We can track those same 30 

524
00:27:05,700 --> 00:27:09,600
locations. 
The same 30 are now doing on 

525
00:27:09,600 --> 00:27:13,800
average 208 million in sales in 
2022. 

526
00:27:14,300 --> 00:27:17,600
So in less than one decade, 
those locations. 

527
00:27:17,600 --> 00:27:21,300
In 2014 have around doubled, 
their average revenue per 

528
00:27:21,300 --> 00:27:23,300
location. 
So, not only does Costco grow 

529
00:27:23,300 --> 00:27:26,400
its Revenue by opening up 
additional locations but every 

530
00:27:26,400 --> 00:27:29,500
single location opened in any 
single year. 

531
00:27:29,700 --> 00:27:33,600
Over the past 20 years grows. 
Its average revenue every year. 

532
00:27:33,700 --> 00:27:36,900
So overall so far, I think this 
company is very well positioned 

533
00:27:36,900 --> 00:27:38,800
to continue growing very 
quickly. 

534
00:27:39,000 --> 00:27:41,800
I think the growth will be much 
faster than a lot of the tech 

535
00:27:41,800 --> 00:27:44,900
names and a lot of the growth 
companies that get talked about 

536
00:27:44,900 --> 00:27:47,200
online. 
All the time, the big question 

537
00:27:47,200 --> 00:27:52,000
that remains is the company at a
price that allows us to buy in 

538
00:27:52,000 --> 00:27:54,900
and get a decent return. 
And that is often the most 

539
00:27:54,900 --> 00:27:58,200
difficult question regarding 
Costco, most people know the 

540
00:27:58,200 --> 00:28:01,300
company's decent they They think
the company's pretty great. 

541
00:28:01,400 --> 00:28:04,200
Most people in the u.s. at least
shop at Costco. 

542
00:28:04,500 --> 00:28:07,200
But the question of price, 
always remains the biggest 

543
00:28:07,200 --> 00:28:08,800
question. 
So, let me share some thoughts 

544
00:28:08,800 --> 00:28:11,100
on how I view the current price 
in the current multiple of 

545
00:28:11,108 --> 00:28:14,800
Costco. 
The P/E ratio trailing is 35, 

546
00:28:14,900 --> 00:28:20,100
and the forward P/E is 33, 33 is
a higher PE ratio of the most 

547
00:28:20,100 --> 00:28:24,000
companies that's typically on 
the premium end higher-end. 

548
00:28:24,200 --> 00:28:26,900
Only companies that are either 
growing incredibly fast or are 

549
00:28:26,900 --> 00:28:30,600
very high quality, get up to 
that type of PE ratio and many 

550
00:28:30,600 --> 00:28:34,300
companies like Google meta. 
Microsoft have a much lower PE 

551
00:28:34,300 --> 00:28:36,500
ratio. 
So right there, it makes Costco 

552
00:28:36,500 --> 00:28:39,800
look very expensive but then we 
look at the free cash flow and 

553
00:28:39,800 --> 00:28:43,600
it also has a very low free cash
flow yield of 1.3 percent. 

554
00:28:44,000 --> 00:28:47,300
Now, the past year, I think was 
an unusually low amount of free 

555
00:28:47,300 --> 00:28:49,700
cash flow for Costco. 
They have proven that they've 

556
00:28:49,700 --> 00:28:52,700
gotten up to 4 billion. 
So I think normalized over the 

557
00:28:52,700 --> 00:28:56,100
past couple of years it's more 
in line with about 2 point, 2 to

558
00:28:56,100 --> 00:28:59,600
2.5 percent, but regardless, 
it's still a pretty low. 

559
00:28:59,700 --> 00:29:02,600
Cash flow yield and a pretty 
high P/E ratio. 

560
00:29:02,700 --> 00:29:05,600
Now, if we look at the history 
of the PE ratio of Costco, we 

561
00:29:05,600 --> 00:29:08,600
can see how this companies 
traded over time and where I 

562
00:29:08,600 --> 00:29:12,900
bought the company originally, I
bought it originally during that

563
00:29:12,900 --> 00:29:15,000
circled time period there, 
right? 

564
00:29:15,000 --> 00:29:19,500
At the end of 2017 and the 
beginning of 2018 at that time, 

565
00:29:19,500 --> 00:29:25,100
period, the PE Ratio was around 
a 28 Ford PE, and it was very 

566
00:29:25,100 --> 00:29:28,000
expensive. 
The rest of the market was much 

567
00:29:28,000 --> 00:29:31,600
cheaper, quote, unquote. 
Out then Costco, lots of 

568
00:29:31,600 --> 00:29:33,800
different companies were selling
out a bigger discount than 

569
00:29:33,800 --> 00:29:35,700
Costco. 
And since then, again, the 

570
00:29:35,700 --> 00:29:38,800
company has returned 160% not 
counting dividends. 

571
00:29:39,300 --> 00:29:44,100
So the seemingly expensive 
company back in 2017 trading at 

572
00:29:44,100 --> 00:29:49,000
a high 20s PE ratio has beat the
market by over double during 

573
00:29:49,000 --> 00:29:50,000
that time. 
Period. 

574
00:29:50,400 --> 00:29:54,000
That's the point that I try to 
illustrate this company often 

575
00:29:54,000 --> 00:29:57,800
looks expensive, but continues 
to outperform the market and 

576
00:29:57,800 --> 00:29:59,600
many other companies that are 
quote unquote. 

577
00:29:59,900 --> 00:30:03,400
Cheap, and it does this because 
of its tremendous organic 

578
00:30:03,400 --> 00:30:06,200
unlevered growth. 
Even if you adjust it for the 

579
00:30:06,200 --> 00:30:12,600
multiples and they didn't expand
at all from 2017 to 2023, then I

580
00:30:12,600 --> 00:30:17,100
still beat the market with my 
Costco by by a large degree even

581
00:30:17,100 --> 00:30:20,500
with no multiple expansion. 
The truth is for this company. 

582
00:30:20,600 --> 00:30:24,100
It never really gets that cheap.
That's what I found with Costco,

583
00:30:24,500 --> 00:30:27,900
anytime Costco trades down into 
a PE ratio, that's in the 

584
00:30:27,900 --> 00:30:32,100
mid-20s, or the Low 20s. 
The rest of the market is 

585
00:30:32,100 --> 00:30:35,500
probably in worse condition. 
That's usually the situation. 

586
00:30:35,500 --> 00:30:37,400
So, Costco is one of those 
companies that just looks 

587
00:30:37,400 --> 00:30:40,600
expensive, all the time, whether
it trades down, whether it 

588
00:30:40,600 --> 00:30:42,700
trades up, it's always looking 
expensive. 

589
00:30:42,900 --> 00:30:47,800
And in my opinion, a 33 Ford PE 
is not the worst price for this 

590
00:30:47,800 --> 00:30:50,500
quality of a company. 
I don't think this is the worst 

591
00:30:50,500 --> 00:30:54,100
deal right now and I may add to 
the position a little bit more 

592
00:30:54,100 --> 00:30:56,500
at this price. 
I'd love to get it in the higher

593
00:30:56,500 --> 00:31:00,300
mid-20s if it trades down to the
higher mid-20s, I'll be 

594
00:31:00,300 --> 00:31:03,500
substantially increasing my 
position, but as of right now, 

595
00:31:03,500 --> 00:31:06,100
it's getting to that point where
I think it's at a pretty decent 

596
00:31:06,108 --> 00:31:09,000
deal but that's my take on the 
current valuation. 

597
00:31:09,000 --> 00:31:12,300
I personally think it's going to
do a lot better than many other 

598
00:31:12,300 --> 00:31:14,600
companies that investors say are
much cheaper. 

599
00:31:14,600 --> 00:31:19,200
Costco may not be as cheap but 
over time the quality of the 

600
00:31:19,200 --> 00:31:22,100
company will win out and the 
organic growth wilin out and I 

601
00:31:22,100 --> 00:31:25,100
hope this helps illustrate. 
Why this company remains a core 

602
00:31:25,100 --> 00:31:28,600
holding of mine. 
One of the nine positions Costco

603
00:31:28,600 --> 00:31:31,100
is a key. 
P'nay in my portfolio. 

604
00:31:31,300 --> 00:31:34,100
If you want to see more in-depth
analysis, like this and me go 

605
00:31:34,100 --> 00:31:36,500
over the numbers in the business
strategy of different companies,

606
00:31:36,800 --> 00:31:39,400
especially the ones that I'm 
putting major investments in to 

607
00:31:39,400 --> 00:31:41,500
just make sure you're following 
along and subscribe to the 

608
00:31:41,500 --> 00:31:43,400
channel. 
But that's the portfolio update 

609
00:31:43,400 --> 00:31:46,300
for today and my recent thoughts
on Costco now. 

610
00:31:46,300 --> 00:31:47,900
I hope you enjoyed. 
Let me know your thoughts. 

611
00:31:47,900 --> 00:31:50,300
If you have any other thoughts 
or anything that I left out with

612
00:31:50,300 --> 00:31:52,900
Costco, let me know in the 
comments below and I'll have 

613
00:31:52,900 --> 00:31:55,900
another video out later this 
week that goes over a lot of the

614
00:31:55,900 --> 00:31:58,700
news at my thoughts on a lot of 
current things going on. 

615
00:31:58,900 --> 00:32:00,700
That's all for now. 
Now, see you in the next one. 

616
00:31:59,600 --> 00:32:00,700
Now, see you in the next one.