Here is What Hedge Funds Think About Costco Wholesale Corporation (COST)

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Costco Wholesale Corporation (NASDAQ:COST).

Is Costco Wholesale Corporation (NASDAQ:COST) a buy right now? Hedge funds were taking a pessimistic view. The number of bullish hedge fund positions were cut by 2 in recent months. Costco Wholesale Corporation (NASDAQ:COST) was in 54 hedge funds’ portfolios at the end of June. The all time high for this statistic is 73. Our calculations also showed that COST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a gander at the latest hedge fund action regarding Costco Wholesale Corporation (NASDAQ:COST).

Do Hedge Funds Think COST Is A Good Stock To Buy Now?

At the end of June, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in COST over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Costco Wholesale Corporation (NASDAQ:COST) was held by Fisher Asset Management, which reported holding $1483.6 million worth of stock at the end of June. It was followed by D E Shaw with a $598.6 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Bridgewater Associates. In terms of the portfolio weights assigned to each position Dorsal Capital Management allocated the biggest weight to Costco Wholesale Corporation (NASDAQ:COST), around 6.47% of its 13F portfolio. Unio Capital is also relatively very bullish on the stock, dishing out 5.44 percent of its 13F equity portfolio to COST.

Judging by the fact that Costco Wholesale Corporation (NASDAQ:COST) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that elected to cut their full holdings last quarter. Interestingly, Steve Cohen’s Point72 Asset Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $40.1 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund dropped about $29.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Costco Wholesale Corporation (NASDAQ:COST). These stocks are McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Medtronic plc (NYSE:MDT), SAP SE (NYSE:SAP), QUALCOMM, Incorporated (NASDAQ:QCOM), Pinduoduo Inc. (NASDAQ:PDD), and AstraZeneca plc (NASDAQ:AZN). This group of stocks’ market values match COST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCD 66 2714779 -1
MS 69 5347633 -10
MDT 68 3390607 3
SAP 17 1603691 -2
QCOM 72 4047519 -1
PDD 49 5276960 -7
AZN 37 2772286 3
Average 54 3593354 -2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 54 hedge funds with bullish positions and the average amount invested in these stocks was $3593 million. That figure was $4321 million in COST’s case. QUALCOMM, Incorporated (NASDAQ:QCOM) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 17 bullish hedge fund positions. Costco Wholesale Corporation (NASDAQ:COST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for COST is 58.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on COST as the stock returned 13.5% since the end of the second quarter (through 10/1) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.