U.S. markets open in 4 hours 44 minutes
  • S&P Futures

    4,385.00
    -26.75 (-0.61%)
     
  • Dow Futures

    34,906.00
    -68.00 (-0.19%)
     
  • Nasdaq Futures

    14,868.00
    -169.75 (-1.13%)
     
  • Russell 2000 Futures

    2,231.90
    -5.60 (-0.25%)
     
  • Crude Oil

    73.53
    -0.09 (-0.12%)
     
  • Gold

    1,833.80
    -2.00 (-0.11%)
     
  • Silver

    25.68
    -0.10 (-0.40%)
     
  • EUR/USD

    1.1903
    +0.0007 (+0.06%)
     
  • 10-Yr Bond

    1.2690
    0.0000 (0.00%)
     
  • Vix

    18.96
    +0.65 (+3.55%)
     
  • GBP/USD

    1.3971
    +0.0013 (+0.09%)
     
  • USD/JPY

    109.5190
    +0.0580 (+0.05%)
     
  • BTC-USD

    39,032.99
    -1,017.70 (-2.54%)
     
  • CMC Crypto 200

    928.88
    -1.48 (-0.16%)
     
  • FTSE 100

    7,037.45
    -40.97 (-0.58%)
     
  • Nikkei 225

    27,283.59
    -498.83 (-1.80%)
     

Costco Wholesale Corporation (COST) Fell Out Of Favor With Hedge Funds

·6 min read

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Costco Wholesale Corporation (NASDAQ:COST).

Is Costco Wholesale Corporation (NASDAQ:COST) ready to rally soon? Investors who are in the know were selling. The number of long hedge fund bets dropped by 5 in recent months. Costco Wholesale Corporation (NASDAQ:COST) was in 56 hedge funds' portfolios at the end of March. 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 Q1 rankings).

At the moment there are a large number of metrics shareholders use to assess stocks. A duo of the most under-the-radar metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform their index-focused peers by a significant amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. With all of this in mind we're going to view the fresh hedge fund action encompassing Costco Wholesale Corporation (NASDAQ:COST).

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

At the end of March, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COST over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Fisher's Fisher Asset Management has the biggest position in Costco Wholesale Corporation (NASDAQ:COST), worth close to $1.28 billion, comprising 0.9% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $705.3 million call position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Costco Wholesale Corporation (NASDAQ:COST), around 5.42% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, setting aside 4.92 percent of its 13F equity portfolio to COST.

Seeing as Costco Wholesale Corporation (NASDAQ:COST) has experienced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few funds that elected to cut their positions entirely in the first quarter. Intriguingly, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, totaling an estimated $24.5 million in stock. Joe DiMenna's fund, ZWEIG DIMENNA PARTNERS, also sold off its stock, about $7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds in the first quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Costco Wholesale Corporation (NASDAQ:COST) but similarly valued. These stocks are T-Mobile US, Inc. (NASDAQ:TMUS), Citigroup Inc. (NYSE:C), Royal Dutch Shell plc (NYSE:RDS), Honeywell International Inc. (NASDAQ:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), The Boeing Company (NYSE:BA), and NextEra Energy, Inc. (NYSE:NEE). This group of stocks' market values are closest to COST's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMUS,98,9055738,-5 C,90,6938143,-5 RDS,36,2190186,2 HON,56,1731346,11 QCOM,73,2765985,-12 BA,59,1437584,4 NEE,63,2725995,2 Average,67.9,3834997,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 67.9 hedge funds with bullish positions and the average amount invested in these stocks was $3835 million. That figure was $4015 million in COST's case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 36 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 39.1. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on COST as the stock returned 8.6% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

Get real-time email alerts: Follow Costco Wholesale Corp W (NASDAQ:COST)

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

Related Content