COST

Costco is a high-quality business with a wide economic moat and strong leadership. However, the stock is priced for perfection, and the investment faces headwinds from valuation compression. The base case scenario suggests a 5.6% annualized return, while a bull case is required for market-beating alpha. Key risks include valuation, macro-political headwinds, and competition from Sam's Club.

COST short: Initiated put options (1/16/26 P960) on this 'overpriced compounder' trading at 54x earnings despite mid-single-digit growth. Well-run but hard to justify >2x market multiple for low-growth, low-margin retailer. Expect significant downside when market reassesses premium valuation.

The investment thesis is to buy Costco shares. The key drivers are its position in the consumer staple industry, its resilience to events like the COVID-19 pandemic, and its consistent growth. The document provides a target price of $533.78, with an upside of 11.8% from the current price of $477.21.