How Does The Smart Money View Costco?

Page 1 of 2

Shares of Costco Wholesale Corporation (NASDAQ:COST) closed 0.58% in green on Thursday after the retailer reported mixed earnings. The wholesale retailer missed revenue expectations by $440 million, but beat earnings expectations by $0.07 per share. The earnings report marks the fourth straight quarter Costco has reported mixed results. Let’s take a closer look at Costco’s earnings report and see how the world’s greatest investors view the stock.


In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, hedge fund experts at Insider Monkey look at the aristocrats of this group, around 700 funds. Contrary to the popular belief, our research has revealed that hedge funds have lagged in recent years because of their short positions as well as the huge fees that they charge. However, hedge funds managed to outperform the market on the long side of their portfolio. In fact, the 15 most popular small-cap stocks among hedge funds returned 118% since the end of August 2012 and beat the S&P 500 Index by 60 percentage points (see the details here).

Follow Costco Wholesale Corp W (NASDAQ:COST)

For its fourth quarter of fiscal year 2015, Costco Wholesale Corporation (NASDAQ:COST) earned $1.73 per share on revenues of $35.78 billion, versus expectations of $1.66 in EPS on revenues of $35.34 billion. Membership sales rose 2.3% year over year to $785 million, while merchandise costs increased by 0.2% to $31.09 billion. Comparable-store sales increased by 2% in the United States, decreased by 10% in Canada, and declined by 7% in international countries outside of Canada. Total sales decreased by 1% in the quarter.

Costco’s quarterly results would have been significantly better had it not been for gasoline price deflation and the strong dollar, however. On a constant currency, ex-gas basis, Costco’s comparable store revenues would have jumped by an average of 6% in the quarter. The same is true for Costco’s full year results. Costco’s comparable store revenues would have increased by 7% year over year for fiscal year 2015 rather than just increasing by 1%.

Overall, Costco did well for fiscal year 2015, with net sales of $113.67 billion and earnings per share of $5.37, an improvement from the net sales of $110.21 billion and earnings per share of $4.65 in fiscal 2014. Costco is in expansion mode, with the company expecting to open 12 warehouses before the end of 2015. The company currently has 686 warehouses, with 480 in the United Sates and 89 in Canada.

The smart money is bullish on Costco Wholesale Corporation (NASDAQ:COST). Of the elite 730 funds we track, 44 funds owned $1.54 billion worth of the company’s outstanding stock (representing 2.60% of the float) on June 30, versus 41 funds and $1.51 billion respectively a quarter earlier. Billionaire Warren Buffett‘s Berkshire Hathaway kept its position the same at 4.33 million shares, while Richard Chilton’s Chilton Investment Company increased its stake by 32% to 722,162 shares. Cliff Asness’ AQR Capital Management raised its holding by 19% to 671,200 shares while David Shaw’s D. E. Shaw added 387,362 shares to its position taking it to 389,316 shares. Israel Englander’s Millennium Management and David Harding’s Winton Capital Management established new positions of 356,574 shares and 262,880 shares respectively.

Like hedge funds, analysts are optimistic about Costco as 14 have a ‘Buy’ rating and nine have a ‘Hold’ rating. None of the analysts have a ‘Sell’ rating. Overall, analysts have a consensus price target of aproximately $154, or about 7% higher than the current price.

Page 1 of 2