COST continues to demonstrate superior execution. In early February, the company reported U.S. sales growth for January of 9.2%.
As noted above, shares of retail competitor WMT declined this month. A key point of differentiation between WMT and COST is the customer base. The typical COST customer is more affluent than the typical WMT customer.
COST customers are facing relatively less pressure on household spending in the context of an economic environment in which lower income consumers struggle to keep up with basic expenses, such as food.
At the same time, all consumers are motivated to maximize value in this environment. Through merchandising and logistics sophistication, COST continues to stand out within the retail landscape for its ability to deliver value to customers.
V shares performed well following the company’s first quarter 2025 earnings report at the end of January. V also held a well-received Investor Day in San Francisco on February 20.
“Credit cards” as a class are often described as vulnerable to technological disruption and crypto-related innovation. The most vulnerable players within the credit card ecosystem are, in our view, the banks that charge high fees, rather than payment facilitators like V, which charge relatively low fees.
V is a clear leader in payments innovation and will continue to benefit from the deployment of new technologies, including crypto, on a global scale. At the Investor Day conference, V laid out a pathway for long-term revenue growth in the 9% to 12% range, supported by enormous and still underpenetrated addressable markets.
On February 4, TXN held its annual Capital Management call with investors. TXN continues to make good progress as the company plots its return to strong free cash flow generation.
TXN’s business mix has shifted over time towards automotive and industrials (now approximately 70% of revenue). Technological advancements in these areas are driving greater demand for analog semiconductors, which TXN dominates.
Investors are now primarily focused on the company’s ability to achieve its medium-term free cash flow goals—and they are pleased with how things are going. But investors should also pay attention to longer term upside potential, given TXN’s positioning in very early stage markets like autonomous driving and robotics.
TXN disclosed on the call that it is now generating material revenue from data centers, for example. Data center business generated some $650 million of sales in 2024, driven by the AI boom.
TXN is not widely regarded as a true AI play and is not valued as one. TXN does not generate expensive AI Graphic Processing Units (GPUs) like NVDA. Instead, it is a market-leading producer of low-cost chips that enable AI-powered technologies to operate.
Technologies fueled by AI innovation will continue to make their way to market in the years and decades ahead, from self-driving cars to personal robots. TXN will inevitably be a key supplier for manufacturers of these products, just as it is now for producers of electric vehicles and industrial robots.
Shares of logistics provider GXO declined after an earnings disappointment in early February resulting from existing customer consolidation, although several underlying trends are positive, including a sales pipeline growing 15%.
Having spurned a take-out offer late last year, there is significant investor frustration with GXO, but key fundamental drivers look solid. Meanwhile, the valuation discount to peers has become substantial.
After delivering a strong performance in January on the heels of an encouraging earnings outlook, TMO shares gave up most of those gains in February.
Investors grew concerned about potential federal spending cuts on health care research related to DOGE activities. We view this as a manageable risk.
Investors in industrial stocks shied away from ETN in February given lingering uncertainty with regard to AI-related capital spending. We are optimistic that the company investor day in March will restore confidence in the growth outlook.
