Elnora H. and William B. Quarton Professor of Business Administration and Economics, Coe College, Iowa
A Multi-Million-Dollar Idea, 4/30/2023
Costco's total return averages approximately 14% per year, including reinvested dividends. Applying the rule of 72, we can estimate that an investment in Costco would double in just over 5 years (72/14 ≈ 5.14).
Charlie Munger once advised that young people should strive to accumulate $100,000, as doing so would make their lives significantly easier. Imagine working diligently and saving enough to reach that $100,000 goal by the age of 30. You could then stop saving, live comfortably off your earnings, and invest your $100,000 in Costco stocks for 30 years. How much would you have at age 60?
Investing in Costco for 30 years allows your initial investment to double roughly six times. Starting with $100,000, it grows to $200,000, then to $400,000, to $800,000, to $1.6 million, to $3.2 million, and finally to $6.4 million.
This strategy doesn't require extraordinary effort, aside from reinvesting dividends. But you need to have faith that Costco will maintain its 14% growth rate per year. In the Growth Stocks chapter of
my stock market strategy book, I present arguments supporting Costco's continued growth in the foreseeable future. I do have faith in Costco. So does Charlie Munger.
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