How to buy Costco stock (COST)—6 steps to invest
It's no secret that buying in bulk can save shoppers a bundle. After all, why would millions of people pay for yearly memberships if it didn't benefit their budgets? While a few warehouse clubs offer compelling savings in the bulk retail space, Costco is the undisputed king of this category. Indeed, Costco is so beloved by its global customer base that its Kirkland brand now enjoys an almost cult-like status1.
Given Costco's sustained success in retail, some investors are curious whether this warehouse could work wonders in their portfolios. Find out how to buy Costco stock and whether its shares are as impressive as its shopping experience.
How to buy Costco stock
As one of the biggest names in the retail-wholesale sector, Costco isn't hard to find on most brokerage platforms. While you should always double-check what a trading platform provides, chances are it has Costco shares if it offers US-listed companies.
- 1.
Choose a brokerage platform. If you don't already have a stock trading account, research a few of the most reputable brokerages offering shares in American companies such as Costco. Before deciding where to sign up, compare different features like fees, trading minimums and third-party reviews to get a sense of which broker is the right choice.
- 2.
Fund your trading account. Next, you'll need money in your account to buy Costco shares. You could usually link a bank account for ACH transfers or use other options like a wire transfer or card payment to deposit funds.
- 3.
Find Costco stock. The ticker symbol for Costco stock is "COST," so enter these letters when searching on your brokerage. You should see Costco's real-time chart appear and options to buy or sell shares.
- 4.
Choose your number of shares. Every brokerage has different rules for minimum investments. Sometimes, you'll have to buy at least one whole share of Costco, while others might let you add fractional shares to your account.
- 5.
Consider different buy orders. The simplest way to buy Costco shares is to place a "market order," which executes automatically at the current rate. However, if you want a bit more control over your purchase, you could use a "limit order," which only executes if COST hits a specific price.
- 6.
Confirm the transaction and monitor your investment. After reviewing any applicable fees with your buy order, you can hit "Confirm" and watch as COST enters your trading account. Now, you can monitor the value of your COST position and decide whether to add more or sell.
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About Costco Wholesale Corp
Costco's origins go back to the 1970s when the visionary retailer Sol Price opened the business-focused Price Club in San Diego. In 1983, James Sinegal and Jeffrey Brotman expanded on Sol Price's initial model and introduced the first Costco in Seattle. Following the success of this initial location, Costco continued to grow throughout the USA and eventually merged with Price Club. Today, Costco counts over 8002 warehouse locations worldwide and nearly 130 million card members3.
Is Costco a good stock to buy?
Back in 2014, one share of Costco cost $117. By the end of 2024, this price has increased by 715% to reach $954. Compared with the S&P 500's 10-year performance of roughly 200%4, Costco has grown faster than the broader market as it expands its brand name and brick-and-mortar locations. Costco also rewards shareholders with attractive features like buybacks and quarterly dividends5, which adds an extra dimension of security and passive income.
While these features make Costco look like an excellent investment, there's no telling whether it can continue growing at the same pace as it matures and faces increasing competition. However, considering Costco's consumer base, brand reputation, and reliable financials, it's often considered a safer "blue-chip" stock for those interested in the retail sector.
Pros and cons of buying Costco stock
Pros
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Strong membership model: Costco's membership-based model guarantees a steady revenue stream and helps encourage repeat visits. Despite membership hikes, Costco still posts 90%6 average renewal rates, highlighting its strong customer loyalty.
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Consistent revenues and profits: Costco has consistently generated steady revenue and profit growth7 year-on-year by focusing on high sales volumes and low prices. Even during economic downturns, customers flock to Costco as they search for the best deals on essential items.
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Dividends and buybacks: To make its shares more attractive, Costco frequently authorizes massive buybacks and rewards shareholders with a quarterly dividend. These incentives provide both downside protection and a form of reliable passive income to compound potential gains.
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Global expansion: Although Costco is dominant in North America, it has begun expanding overseas to capture an even greater market share. Costco investors could see this international expansion reflected in growing revenues and profits.
Cons
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Thin profit margins: Costco operates on extremely tight margins — often 12 to 13%7 — due to its low-cost pricing strategy. While these prices drive traffic to Costco's stores, the margins are lower than many other retailers, leaving little room for budgeting errors.
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Competition: While Costco perfected the membership-based warehouse model, plenty of challengers offer the same service. Besides obvious rivals like BJ's and Sam's Club, Costco has to face big box retailers and ecommerce sites such as Amazon.
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Supply chain disruptions: Costco's heavy reliance on high volumes and efficient inventory turnover means any snag in the flow of goods can lead to empty shelves and angry customers. These disruptions can also force Costco to absorb higher costs for goods and shipping, potentially squeezing its already thin margins.
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Premium valuation: Due to its sustained growth and positive track record, Costco frequently trades at a higher price-to-earnings ratio than its peers. While many argue this premium is justified, it's not as attractive for value-based investors and leaves little room for error in Costco's financial reports.
FAQs
Eric Esposito is a freelance contributor on MoneyWise with an interest in financial markets, investing, and trading. In addition to MoneyWise, Eric’s work can be found on financial publications such as WallStreetZen and CoinDesk. When not researching the latest stock market trends, Eric enjoys biking, walking his dog, and spending time with family in Central Florida. Eric holds a BA in English from Quinnipiac University.
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