Everybody's Stores: "Costco Wholesale, whose determination to deliver value and innovative products to its 23 million members, has made it one of the country's top retailers." With its strong labor relations, low employee turnover and liberal benefits, Costco has been called an "anti-Wal-Mart." Its approach has paid dividends, because Costco, based in Issaquah, Wash., hasn't encountered the same community resistance as Wal-Mart when it has sought to open new stores. "Retailing isn't rocket science. Costco has figured out the big, simple things and executed with total fanaticism," says Charles Munger, a Costco director for the past 10 years. The outspoken Munger, 82, is better known as Warren Buffett's long-time partner at Berkshire Hathaway (BRKA), where he serves as vice chairman. Costco has succeeded by flouting industry norms. It charges customers a base yearly fee -- now $50 -- to shop in its sprawling stores, which offer quality goods at low mark-ups. Consequently, its margins are among the slimmest in retailing. The privileges also extend to employees, who are paid well and enjoy generous health-care benefits. THIS IS A GENUINE GROWTH STORY. Earnings per share have grown at a 12% annualized rate in the past five years. Neil Currie, a retailing analyst at UBS Securities, believes the company is capable of generating 13% growth in earnings per share in the next few years, and an even higher rate if it gets more aggressive in repurchasing shares. The bullish Currie carries a 12-month price target of $66. With large annual buybacks, Costco could earn more than $4 a share in fiscal 2010, Currie estimates. That could support a stock price of $80. Could it be a candidate for a leveraged buyout? Costco does possess some of the key characteristics private-equity players seek. It has a strong balance sheet, predictable cash flow and a durable franchise. Its market value is a hefty $26 billion, but LBOs of that size are doable these days. Witness Blackstone Group's winning $39 billion bid for Equity Office Properties Trust (EOP), announced last week.

Speaking of Dividends: "When Wrigley (ticker: WWY) appeared in this space in February 2006 after sweetening its dividend, its fourth-quarter earnings had been gummed up by higher sugar prices and restructuring expenses. Last Tuesday, Wrigley again upped its payout, but this time it also reported a 37% jump in December-quarter profit, thanks to stronger sales, chiefly in Europe, Asia and the Middle East. The Chicago-based king of the $15 billion global chewing-gum market will now pay 29 cents a quarter on shares of its regular and Class B common, up 13% from 25.6 cents. Wrigley is also firing off a barrage of new products globally."

From Strong - but Stretched - Market: Anyone who likes Fortress (the buyout and hedge-fund shop's IPO was a rousing success last week) ought to love Affiliated Managers Group (AMG), a well-run owner of quality asset-management operations. It's nicely diversified by product line and asset class (including some hedge funds) and trades for near 16 times 2007 earnings. AMG has been among the best-performing stocks of the past decade. It doesn't carry the questionable cache of owning a piece of the first alternative-asset manager to hit the NYSE, but it provides a more balanced play on the always-lucrative asset-management business."

Savvy Moves Position CIT for Gains: CIT GROUP HAS POSTED an operating profit in each of its 98 years. It's a good bet the commercial-lending giant hits the century mark with annual-profit skein intact, given better-than-expected fourth-quarter results and a new asset-management strategy. If it does, CIT's stock (ticker: CIT), up 19% in the past 12 months, could get another boost. Analysts expect 2008 profits to grow 9%, to $1.184 billion, from an expected $1 billion this year. High expenses and exposure to the slumping sub-prime mortgage market pose challenges, but last month management raised its 2007 earnings outlook, underscoring Chairman Jeffrey Peek's contention that "CIT has never been stronger or better positioned for the future." CIT trades for 10 times analysts' 2008 earnings estimates of $6.06 a share and could climb to 67 as the company expands, says Soleil analyst Craig Maurer.

BHP Billiton's MASSIVE SHARE BUYBACK program reflects the miner's confidence in its future internal growth and pricing power. That confidence is unshaken, despite the acquisition sprees of many of its rivals and consolidation among its most important consumers, as well as China's emergence as a net exporter of raw materials. The $10 billion buyback, on top of a 14% dividend hike, to be implemented through 2008 shows that BHP believes it can generate large amounts of operating cash flow. Management seems confident that it can handle the bumps of incremental labor and other capital costs, too. By the time the latest planned buyback ends, BHP Billiton will have returned nearly $27 billion to investors since mid-2001, despite having spent $7 billion to buy Australian miner WMC Resources in 2003 to boost its nickel portfolio. These are good days for BHP's investors. And its willingness to line its shareholders' pockets may pressure rivals Rio Tinto (RTP) and Anglo American (AAUK) to become more generous.

"The Vital Signs Look Good": "At around 51 a share, UnitedHealth fetches an inexpensive 15 times future earnings. With sales and profits up smartly, the stock could climb to the 70s in 12 to 24 months." "Few Companies have been hit harder by accusations of stock-option backdating than UnitedHealth Group, the giant health-care insurer. Allegations that the company lined management's pocket by altering the date of options grants resulted last year in the departure of former CEO William McGuire and a member of the board of directors. UnitedHealth (ticker: UNH) hasn't filed a quarterly financial report with the Securities and Exchange Commission since last year's first quarter, because it still hasn't determined the accounting treatment for formerly issued options. The company faces shareholder lawsuits and investigations by the SEC, the Internal Revenue Service and the U.S. attorney for the Southern District of New York. And its shares, which once topped 63, now trade for 51. Yet, for all its maladies, the patient is alive and kicking -- vigorously, in fact. UnitedHealth's underlying business is strong and growing, and it is hard to imagine its fortress-like balance sheet, with $2.6 billion of net cash, can't absorb any fines or accrued taxes the company is likely to owe. Indeed, the Minnetonka, Minn.-based insurer still is considered among the best in the business, hailed for its sophisticated use of technology, innovative culture and nationwide network of health-care providers. Some of Wall Street's smartest investors are betting UnitedHealth's stock will follow profits higher. Omega Advisors, for one, holds roughly 1.1 million of the company's 1.4 billion shares, and expects its price/earnings multiple to expand to 17 on $4 a share of earnings in 2008. That implies a price of 68 a share, some 30% above current levels. "All of UnitedHealth's metrics are significantly ahead of the market," says David Mandelbaum, an Omega partner. He points to the company's 7.5% free-cash-flow yield (cash flow divided by market capitalization), 22% return on equity and strong earnings growth."

Stocks in the Spotlight Friday: "Shares rose 2% after the communications-chip maker reported strong sales in its fourth quarter. The company reported earnings of 32 cents a share on revenue of $923.5 million, above the consensus estimate for earnings of 31 cents a share on revenue of $910.6 million. Needham & Co. analyst N. Quinn Bolton reiterated a Buy rating and raised his price target on the stock to $40 from $32. "While some investors may worry about the rising development costs of new products… we feel that Broadcom is investing for the future, and expect it to emerge from this downturn with more growth," Bolton wrote in a research report."

Stocks in the Spotlight Friday: DynCorp shares rose 4% after the provider of technical services to government agencies enjoyed an upgrade to Outperform from Peer Perform by Bear Stearns & Co. analyst Peter J. Barry, who set a $23 price target, citing strengthening fundamentals in DynCorp's third quarter "as mix and cost containment buoyed margins meaningfully." Barry added that a new fixed-contract arrangement preferred by the government "seems to provide seasoned companies like DynCorp with greater opportunity to leverage their assets and scale."