Discounting Costco to Wal-Mart Signals Surge on Sales

It is interesting that their has long been a relationship between Costco and Wal-Mart stock price movement. They are both discount retailers, so it makes sense. With Americans straped for cash and bleeding benjamins at the pump, it may be time to go to Wal-Mart and Costco and take stock in them as well.

If I wasn't buried in debt, I would purchase some Costco stock.

Sept. 3 (Bloomberg) -- Costco Wholesale Corp., the biggest U.S. warehouse club, may have its best holiday-shopping season since going public 23 years ago because most U.S. retailers are preparing to have their worst since 1979.

Over the next 12 months, that will change with the warehouse chain likely to outperform the world's largest retailer [Wal-Mart], gaining 27 percent to $85 a share, according to estimates by Edward Weller, a ThinkPanmure LLC analyst in San Francisco. A surge in the stock would follow an historical relationship between the two chains' shares, based on data compiled by Bloomberg. Costco lagged behind run-ups in Wal-Mart at least four times in the past four years before rallying to surpass it.

Costco's price-to-earnings ratio of 23 is ``low compared to where they've been historically,'' said Patricia Edwards, a portfolio manager at Wentworth Hauser & Violich in Seattle.

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