Two Visions Of America's Future
On X yesterday, America 2100 shared a thread contrasting two different versions of retail: membership-only stores, as represented by Costco Wholesale Corporation (COST) and Walmart Inc.'s (WMT) Sam's Club, versus open-to-all CVS Health Corporation (CVS) and Walgreens Boots Alliance, Inc.'s (WBA) Walgreens. They made the point that only one of those models works well when there's low social trust.
Costco and Sam's Club are raking in record profits. CVS and Walgreens are closing hundreds of stores across the country.
— America 2100 (@America_2100) August 21, 2024
Why? Well, for one, they have different business models. The former seeks to exclude bad customers; the latter seeks as many customers as possible. (2/15) pic.twitter.com/fazGXbpCKL
Costco, Sam's Club and other "club stores" are killing it right now.
— America 2100 (@America_2100) August 21, 2024
Sam’s Club—which hasn’t opened a new store in 10 years—plans to open 30 new locations over the next 5 years. They've had record membership numbers and 11 straight quarters of double-digit sales growth. (4/15) pic.twitter.com/J24XzVa8cX
CVS, Walgreen's and other non-"club" stores aren't faring as well. In 2019, Walgreens closed 200 stores. Last year, it closed an additional 150 stores. This June, it announced another round of "significant" closures.
— America 2100 (@America_2100) August 21, 2024
Last year, Rite Aid filed for bankruptcy. (6/15) pic.twitter.com/Ud2KOO1Htv
CVS, Walgreen's and other non-"club" stores aren't faring as well. In 2019, Walgreens closed 200 stores. Last year, it closed an additional 150 stores. This June, it announced another round of "significant" closures.
— America 2100 (@America_2100) August 21, 2024
Last year, Rite Aid filed for bankruptcy. (6/15) pic.twitter.com/Ud2KOO1Htv
In 2022, Walgreens said their rate of “shrink”—i.e., lost inventory, largely due to theft—had increased by 52% since the beginning of the pandemic, amounting to tens of millions of dollars in lost earnings.
— America 2100 (@America_2100) August 21, 2024
This has fundamentally transformed the way they do business. (8/15) pic.twitter.com/H9ZjTRP1fR
So what's the point here?
— America 2100 (@America_2100) August 21, 2024
"Exclusion" has become a dirty word in modern politics. But in reality, exclusion is the basis of civilization. All functional institutions have an element of exclusiveness. Nations themselves are exclusive: They have citizens, borders, etc. (10/15) pic.twitter.com/ZyjPltZdGp
Today, that high-trust society is collapsing because we're too inclusive—or at least, too inclusive of bad things. (At the same time, our institutions have become increasingly exclusive towards good things).
— America 2100 (@America_2100) August 21, 2024
The result is a large-scale version of what's happening to CVS. (12/15) pic.twitter.com/SEoxUxIqZg
Costco and Sam's Club aren't exactly wealthy country clubs. If anything, their names are associated with the working and middle classes.
— America 2100 (@America_2100) August 21, 2024
But their loyal customers are from the parts of Middle America that are still capable of abiding by basic civilizational norms. (14/15) pic.twitter.com/2rv2hqeDCU
🚨 We're a new account on here. We'll be doing a lot more in-depth threads and videos over the next few months.
— America 2100 (@America_2100) August 21, 2024
Our philosophy is simple: America first. America forever. 🇺🇸
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Walgreens Versus Costco
The contrast between the two stocks over the last year has been extraordinary--COST up more than 60%, and WBA down more than 60%.
What If Costco Is Forced To Be Inclusive?
In a quote post of America 2100's thread, author Auron MacIntyre raised that question.
It works as a screening mechanism for crime now but the government will eventually have to declare it racist for the same reason that the EEOC is suing gas stations that use criminal background checks to screen employees https://t.co/ZZ1oUy3sS7
— Auron MacIntyre (@AuronMacintyre) August 21, 2024
Gas station chain Sheetz has been sued for conducting criminal background checks on its job applicants.
The lawsuit was filed by the Equal Employment Opportunity Commission and lists Sheetz, Inc.; Sheetz Distribution Services, LLC; and CLI Transport, LP as the defendants. The EEOC says that Sheetz has disproportionately screened out black, Native American, Alaska Native, and multiracial applicants from its hiring process due to the chain not hiring applicants with criminal conviction records.
It sounds like MacIntyre's warning may eventually come to pass if current political trends continue in the U.S. With that in mind, let's look at hedging Costco past November's election.
Downside Protection For Costco
The 1 minute TikTok below shows a couple of ways of hedging Costco beyond the November election, using the Portfolio Armor iPhone app.
@dpinsen ♬ All Comes Crashing - Metric
Here's a screen capture of the first hedge shown there, the optimal puts to hedge 1,000 shares of COST against a greater-than-20% drop by late December.
As you can see there, the hedging cost was 0.68% of position value (calculated conservatively, using the ask price of the puts). The optimal collar hedge shown in the video had a negative net cost, meaning you would have collected a net credit if you opened that hedge.
You can download the Portfolio Armor iPhone app here, or by aiming your iPhone camera at the QR code below.
Another Trade Exit
Earlier today, my subscribers and I exited a trade on Zoom Video Communications (ZM) for a 113% gain, though we left a little money on the table with that one. If you'd like a heads up when we place our next trade, feel free to subscribe to our trading Substack/occasional email list below.
Left some money on the table with this Zoom trade.
— Portfolio Armor (@PortfolioArmor) August 22, 2024
Could have exited at $4 or $4.50 for a 150% or 181% gain, but lowered my exit price last night to $3.40, so I got out with a 113% gain. $ZM pic.twitter.com/slXXratYUj
If you'd like to stay in touch
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You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).
