Buy, Sell, Hold: Amazon, Costco, and Walmart Stock Edition

U.S. retail is a multitrillion-dollar industry and a pillar of America's economy. Amazon (NASDAQ: AMZN) , Walmart (NYSE: WMT) , and Costco Wholesale (NASDAQ: COST) are industry titans and world-class stocks that have all outperformed the broader stock market over the years.

These companies generate an astonishing $1.5 trillion in annual revenue. Their size gives them cost advantages that dominate smaller competitors, and they are poised to continue growing over the coming decades.

However, their shares aren't all created equal. While all three are blue chip stocks , their varying price tags give investors much to consider. One of these stocks is a buy, one is a hold, and the other is a sell. Scroll down to see which one is which.

Buy: An e-commerce giant firing on all cylinders

Amazon has become the dominant e-commerce retailer in the United States. The company has amassed a whopping 37.6% market share, miles ahead of second-place Walmart. No company has the supply-chain capabilities to deliver such a breadth of products to consumers quickly, creating an unmatched consumer experience. Its subscription service, Amazon Prime, only reinforces the value proposition with streaming and other perks.

However, Amazon's appeal spans beyond e-commerce; the company's cloud platform is also the world leader. Amazon Web Services is a pillar of the digital economy and a cash cow that generates massive profits. Management invests those profits throughout the business to create future growth opportunities. Arguably, no company is as aggressively expanding in new and existing markets as Amazon, which means the sky is the limit for its long-term investment potential.

Despite its track record as a millionaire maker, Amazon's stock is still somehow cheap today. Amazon's hefty investments in growth mask the fact that the stock is at its lowest valuation in a decade if you compare its operating cash flow to its share price. Meanwhile, analysts believe earnings will grow by nearly 30% annually for the next several years. Don't hesitate to snatch up shares and hold them long-term.

Hold: America's largest retailer could shine in a recession

Walmart is America's largest retailer; roughly 90% of the country's population lives within a short drive of a store. The company is famous for its low prices and also known for leveraging its massive size and bargaining power to do it. Walmart's store network and ability to reach shoppers have helped it grow. The company has expanded to other retail categories, including big-box, via Sam's Club and e-commerce.

Unfortunately, Walmart's stock isn't as outstanding a value as its products can be. Today, shares trade at a forward P/E of 28. That's a premium to the broader stock market, likely due to Walmart's sterling reputation on Wall Street. The company has paid and raised a dividend for 51 consecutive years, and a fortress-like balance sheet backs that. Plus, Walmart is likely to thrive in a recession when consumers leave competitors for Walmart to save money.

Analysts expect Walmart to continue growing for years, but estimates call for long-term earnings growth averaging just over 7%. It's hard to justify buying a stock at that valuation when you only get single-digit earnings growth. It might not be a bad idea to hold onto shares for Walmart's stellar fundamentals, but it's probably best to avoid buying for now.

Sell: This popular big-box retailer is woefully expensive

Writing this next section is almost painful, but one can't ignore the facts. Look, Costco Wholesale is a genuinely excellent business. Its massive size helps it offer products at cheap prices, and its famous loss-leading products, such as its $1.50 hot dog meal, have created a cult-like following and loyalty among those who shop there. The membership fee that consumers pay to shop at Costco is genius and is its primary source of profits .

However, despite its fantastic business, Costco stock has become so expensive that it's worth considering selling some shares. The stock trades at a whopping forward P/E of over 52, yet analysts believe earnings will grow by just 9.5% annually over the long term. That seems doable based on Costco's still-expanding store footprint and ability to raise membership dues.

Nearly 10% growth is nothing to sneeze at, except when paying over 50 times its earnings. There isn't any margin of safety in the stock price, which is a dangerous position to be in if a recession hits and shoppers start pulling back their wallets. Rather than roll the dice, consider selling and getting back in when the price makes more sense.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy .