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Why Costco Wholesale (COST) is an Incredible Growth Stock?

RiverPark Advisors an independently-owned investment firm, recently published its first-quarter RiverPark Long/Short Opportunity Fund commentary. During the first quarter of 2020, the RiverPark Long/Short Opportunity Fund returned 9.48% (institutional shares), compared to the total return of -19.60% by the S&P 500 Index. You should check out RiverPark’s top 5 stock picks which helped them beat the market by nearly 30 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, RiverPark Advisors highlighted a few stocks and Costco Wholesale Corp (NASDAQ:COST) is one of them. Costco engages in the operation of membership warehouses. Year-to-date, COST stock gained 4.0% and on May 7th it had a closing price of $305. Its market cap is of $135.15 billion. Here is what RiverPark Advisors said:

“Costco is the third largest global retailer and the 14th largest Fortune 500 company with $155 billion of sales. Even so, COST grew sales 10% last quarter. The company has 101 million cardholders and a 91% membership renewal rate generating $3.5 billion in annual fees from its members (accounting for about 70% of operating income). Its incredibly low markup makes it difficult for others to replicate or compete.

Costco is well-positioned to outperform over the near-term and the long-term. We expect continued new store growth, new membership revenue growth and same store sales growth all leading to mid-single-digit/high-single-digit annual revenue and operating income growth. Shareholder returns should be further enhanced by the company’s $3.1 billion net cash position, $1.1 billion annual dividend, and consistently growing free cash flow, which was $3.5 billion last year.”

In Q4 2019, the number of bullish hedge fund positions on COST stock increased by about 11% from the previous quarter (see the chart here). Is COST stock worth your attention right now?

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

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