Let's Look at the 'COST' of a Government Shutdown
Here are our views on this retailer as a shutdown looms; also, Wall Street gets more bullish on these seven Pro Portfolio holdings.
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Today brings an end to the current quarter and a month that has bucked the historical trend. But today also leaves us staring down a potential government shutdown and the potential for “mass firings.” We’ll spare you the rhetoric on both sides and simply say that in the past, shutdowns have not hobbled the market, and the impact on the economy has hinged on the duration of the shutdown. This time around, if we do get those mass firings, it could be a headwind to aggregate consumer spending as we move toward the holiday shopping season, which will unofficially kicks off next week with Amazon’s (AMZN) next Prime Big Deals Day.
That potential consumer headwind should be a tailwind for not only our shares of Amazon, but also TJX Companies (TJX) and Costco (COST) .
Here, we'll dig into Costco. We’ve been getting a few questions over in the Forum about our COST shares. In our earnings note out last week, we explained why the quarter very much reinforced the reason why we prefer the company’s membership-driven business model and why we continue to own the shares heading into what is typically the strongest period of the year for the company. That should quell questions over COST shares being below our panic point. Remember, however, that panic points are levels at which we review why we own a company’s shares. We just did that with the earnings note from last week.
Do we have some room to make a small addition to COST shares? We do, and we are looking to see what the outcome is for the potential government shutdown before making any such move with COST shares or any others. We believe that while past government shutdowns have had little if any impact on the market, should we see the Trump administration move forward with those mass layoffs, the market will need to readjust some of its expectations. We’ll want that to roll through before making any next moves.
If we get a deal to avert the shutdown or those mass layoffs do not happen, that would be a reason for us to scoop up a few more COST shares.
Coming up, we have Amazon’s big hardware event that should showcase new Kindles, Ring, and other devices. We’ll be looking to see how the company layers in AI and what improvements its made to Alexa+, its AI augmented voice assistant.
While we wait for that event, we’ll share the following analyst views on our holdings:
KeyBanc lifted its Nvidia (NVDA) price target to $250 from $230, reiterating its Buy rating
Evercore ISI boosted its Morgan Stanley (MS) and Bank of America (BAC) targets to $165 and $55 from $150 and $49, respectively.
Mizuho started coverage on Meta (META) with an Outperform rating and named it a “Top Pick”. Shares of Alphabet (GOOGL) also picked up an Outperform rating, as did Amazon (AMZN) shares.
Stifel initiated coverage on Waste Management (WM) shares with a fresh Buy rating and a $252 target.
The Pro Portfolio is long WM, AMZN, GOOGL, META, TJX, MS, BAC, NVDA and COST.
