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TheStreet Open House

5 Cash-Rich Stocks to Buy in 2013

Stocks in this article: GMCOSTAAPLATVIMRVL

Costco Wholesale

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Last up is cash-rich retailer Costco Wholesale (COST), a warehouse store than boasts 430 locations worldwide. Costco is the standard bearer in the "wholesale" store business. Even though rivals have more stores, Costco makes more money thanks to a niche in providing bargains on big-ticket items that boosts COST's sales per square foot to around twice what the next guy brings in.

Costco's model is starkly different from a conventional retailer. The firm doesn't want street traffic meandering into its stores and buying a 100-pack of chewing gum or a gallon of shampoo. Instead, it operates a membership model, which means that only the firm's 64 million members can shop in its stores. That membership restriction provides Costco with a recurring revenue stream, and (more significantly), a very loyal and sticky customer base. Because consumers are less likely to carry memberships from competing wholesale clubs, Costco's existing base of higher-spending customers gives the firm a shallow economic moat versus its peers.

Memberships provide most of Costco's profits, so the firm can offer actual merchandise at paper-thin margins. The model works. Costco currently has $4.3 billion in net cash and investments, a position that offsets around 10% of COST's market cap. The upward trajectory in Costco's sales is impressive, and the free cash the firm pulls out of those operations give Costco some big options in returning value to shareholders. A strong uptrend in shares rounds out the picture for this company.

To see these value-centric names in action, check out the Cash Rich Buys Winter 2013 portfolio on Stockpickr.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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