Comment Updates: Costco, Cognex, and Vail Resorts
The MyWallSt analyst team is constantly monitoring the stocks on our shortlist and reassessing our investment theses.
Over the past few days, we’ve updated our comments on the following companies:
A long-time favorite of the MyWallSt analyst team, Costco’s business model is well-suited to times of economic uncertainty. Over 60% of the company's profits are derived from membership fees, with an average 92% retention rate — even in the face of occasional price-hikes.
For $60 a year, members get access to aggressively discounted goods and services, with additional benefits for premium members. Costco’s relentless pursuit of low-prices has even led it to develop its own in-house brand, which many customers favor over more established names.
Many retailers are currently struggling to keep shelves stocked in the wake of global supply chain issues, hampered further by labor shortages. Costco, we believe, will be able to navigate these headwinds. As one of the largest retailers in the world, Costco has significant bargaining power with suppliers, and is well-regarded as one of the best companies to work for relative to peers. Costco has one of the lowest turnover rates in the industry, and provides a host of benefits to all its employees (even part-time ones).
For over 40 years, Cognex has been at the forefront of an industrial revolution. Their machine vision systems are critical to manufacturers looking to automate their processes. Everything from the phone in your pocket to the car you drive has been checked by Cognex’s system to ensure quality. Major customers include Amazon, Apple, Tesla, BMW, and Ford — and while there is some risk in terms of revenue concentration, Cognex has secured a reputation for quality that few competitors can match.
While Cognex’s revenue growth can be lumpy, due to the nature of upgrade cycles, the company has averaged around 14% sales growth over the last ten years. They’re consistently profitable and have plenty of cash on the balance sheet to withstand a protracted economic downturn.
Cognex ticks all the boxes we look for in a great long-term compounder — a great product, top-quality customers, sound financials, and visionary leadership with skin in the game.
Vail Resorts is a company in a transition. In 2008, the company launched its EPIC pass, which gave skiers year-round access to all its resorts. The popularity of the pass has exploded in recent years, which has helped the company maintain consistent revenue growth even when the weather wasn’t ideal.
However, that change in their business model has brought about challenges with overcrowding and customer service. It’s also led to intense competition from copycat offerings.
New CEO Kirstin Lynch recently announced a significant pay bump for all its North American employees as well as affordable housing. With over 37 resorts across the US and Canada, this represents a major investment that will dampen profits over the near-term, but will be crucial to rebuilding the company's reputation as a premium leisure operator.