You know you invested in a good company when even the local weed shop gives them high praise. So it is with one of our latest stock picks in our Growth Stock portfolio this year, Costco.
Other retailers like Target and Walmart have struggled to keep up with a change in consumer behavior. Consumers are changing from buying TVs and home goods during the pandemic, to buying clothing and things that make them look good as everyone resumes their social lives.
Costco once again proved they’re the best retailer on the planet by anticipating the change and managing their inventory like pros. The stock has reflected that and we’re glad to own it now.
It’s not just Costco, though. Most stocks (and the stock market in general) are significantly higher than their June 16 low, and our investment accounts are finally heading in the right direction. We gave three reasons for the pullback in a letter on April 22, and those same three reasons are why the market is bouncing:
Gas prices are declining. Not exactly news, we’ve all noticed this the last few months, but oil and gas prices dropping are part of the reason we are seeing some optimism show up in the stock market. People’s wallets won’t be quite as pressed now that gas is below $5 and $6 per gallon.
Inflation peaked…for now. The last inflation report was an 8.5% gain from last year. That was down from 9.1%. So inflation has peaked… unless next month is even higher. One encouraging sign is that commodity prices are coming down like lumber, copper, and oil, which should keep the prices of goods from inflating as much in the future.
Russia/Ukraine news is not front and center. The war in Ukraine is still going on, but it doesn’t dominate news coverage now. This doesn’t mean it can’t get worse. For now, investors seem to be taking it in stride; deciding the world will continue even with this war raging on.
The change in mood in a relatively short period of time is why we encourage people to stay invested even when the accounts are down. We can never tell when investors, which are emotional beings, will go from feeling like stocks are up-in-smoke one month, to singing their high praise the next.
It’s easy to get swept up in the emotional roller coaster when articles, like this one, pop up saying the stock market could be 16% higher in a year. But let’s take it all in stride and remember this: if the market continues higher, we will cheer. If stocks resume their decline, we will deploy the cash set aside in the portfolio and see if we can find other Costcos to invest in.
Stocks rising was not the only good news in July. I became a father for the fourth time July 27th. My son, Charlie Luke Porter, was born two weeks early. He and mom are happy and healthy, and I’m trying to remember how to sleep with a baby on my chest in the living room at night to give mom a break.
***No babies were harmed in the taking of this picture!
Thanks for reading,