By Michael Nolan - August 7, 2012 | Tickers: COST, LUV, TGT, WMT | 0 Comments

Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

Costco. Normally, I like to build suspense about the stock I'm sharing with you, but, today, I'm coming right out with it: Costco (NASDAQ: COST) is a perfect long-term stock. But you shouldn't trust just anyone who tells you what to invest in: you should have evidence; you should have proof.

So, what's the secret behind Costco? Well, you already know its keys to success: wholesale prices, seemingly unlimited amount of products, etc. But what is the key behind the scenes that differs Costco from its competitors?

Well, what fun would we have if I gave everything away immediately. I mean, come on, I already gave you the ticker. I can't just hand over everything.

So before I get to Costco's secret, why don't I start with the long-term case for Costco.

Costco: Profile of a Company

Several elements of the goliath make Costco into the successful company that it is: the wholesale factor I mentioned earlier, the low-cost/high-profit element, in addition to a few other parts of the discount store. Yet, many successful companies are publicly traded. Success isn't enough to make me click "buy" for the long run. So what makes Costco perfect for years to come?

Check out Costco's Return on Equity (ROE): according to theory, the company with the highest ROE (in comparison to its competitors) typically brings the best returns to its shareholders. Costco's ROE is 12.50 -- a very competitive ROE. Rival SuperValu's ROE is negative ... not very impressive.

Now, how about their dividend? Well, a 1.1% dividend isn't whopping, but it is something.

Continue reading here:
One Perfect Long-Term Stock...And the Secret Behind its Success