Rogue Funds, an investment management company, released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund depreciated 12.4% net of fees in the quarter. The firm anticipates significant volatility in the near future. Because of the Fund’s concentration, significant declines as well as significant rises in the total returns throughout the course of the year are not unusual. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its first quarter 2025 investor letter, Rogue Funds highlighted stocks such as Costco Wholesale Corporation (NASDAQ:COST). Costco Wholesale Corporation (NASDAQ:COST) operates membership-based warehouses that offer a range of merchandise categories. The one-month return of Costco Wholesale Corporation (NASDAQ:COST) was -2.75%, and its shares gained 11.44% of their value over the last 52 weeks. On July 03, 2025, Costco Wholesale Corporation (NASDAQ:COST) stock closed at $987.02 per share, with a market capitalization of $437.72 billion.
Rogue Funds stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its first quarter 2025 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST): I believe with the tariffs that Costco stock has barely been impacted but they are extremely vulnerable to recessionary scenarios and aren’t as defensive as individuals believe. First, their consumer base is no longer as purely upper middle class as it used to be and will be more exposed to the cyclical nature of retail. Their “sell in-bulk” nature makes this exposure much worse. Unlike Walmart, if I just got laid off, I don’t need to go buy 50 rolls of toilet paper and this makes them much less defensive than Walmart and much more cyclical for low-income consumers (which has slowly made up more and more of their consumer base due to a very slow increase in annual fees). They are currently trading at 55x+ earnings, and I don’t usually like to short cult stocks but with expected growth of 11% (I am highly skeptical of this number as they have only grown in the single digits since 2022) and an economic contraction on the horizon, it seems extremely likely to me that they will not be able to hold this valuation for much longer. If we take into account Canada boycotting American goods (Costco’s second largest footprint outside of the US, having over 100+ stores) and probably ~8%-10% of goods coming from China along with a 10% tariff on 30% of goods, it is unlikely this bodes well for Costco over the next 9 months. Combining that with a lofty valuation (and no Charlie Munger to tout their horn), we could see a serious pull back. This is set up as a hedge for the portfolio and we will be fine if these expire worthless.”
A customer in a warehouse aisles, browsing the wide range of branded and private-label products.
Costco Wholesale Corporation (NASDAQ:COST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 93 hedge fund portfolios held Costco Wholesale Corporation (NASDAQ:COST) at the end of the first quarter, which was 96 in the previous quarter. While we acknowledge the potential of Costco Wholesale Corporation (NASDAQ:COST) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Costco Wholesale Corporation (NASDAQ:COST) and shared the list of set-it-and-forget-it stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of COST as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
