In this article we will take a look at whether hedge funds think Costco Wholesale Corporation (NASDAQ:COST) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Costco Wholesale Corporation (NASDAQ:COST) a buy, sell, or hold? Investors who are in the know were selling. The number of bullish hedge fund positions were trimmed by 2 recently. Costco Wholesale Corporation (NASDAQ:COST) was in 54 hedge funds’ portfolios at the end of the second quarter of 2021. 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). There were 56 hedge funds in our database with COST holdings at the end of March.
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Do Hedge Funds Think COST Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards COST over the last 24 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
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, designating 5.44 percent of its 13F equity portfolio to COST.
Seeing as Costco Wholesale Corporation (NASDAQ:COST) has faced declining sentiment from the smart money, it’s safe to say that there was a specific group of hedgies that elected to cut their positions entirely in the second quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling about $40.1 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund dumped about $29.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds in the second quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Costco Wholesale Corporation (NASDAQ:COST) but similarly valued. We will take a look at 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 (NYSE:AZN). This group of stocks’ market caps are closest to COST’s market cap.
| 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on COST as the stock returned 30.1% since the end of the second quarter (through 11/5) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
