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Should You Be Tempted To ‘Sell’ Costco Wholesale (COST) Stock?

·3 min read

ClearBridge Investments, an investment management firm, published its “All Cap Growth Strategy” first quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge All Cap Growth Strategy outperformed its Russell 3000 Growth Index benchmark during the first quarter. On an absolute basis, the Strategy had gains across eight of the 10 sectors in which it was invested (out of 11 sectors total). You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q1 2021 Investor Letter, the fund highlighted a few stocks and Costco Wholesale Corp. (NASDAQ:COST) is one of them. Costco Wholesale Corp. (NASDAQ:COST) operates a chain of membership-only big-box retail stores. In the last three months, Costco Wholesale Corp. (NASDAQ:COST) stock gained 15%. Here is what the fund said:

"To take a more discretionary stance in retailing and make room for our additional purchases where we see better opportunities, we closed our position in Costco Wholesale. Costco was a big winner during the most restrictive periods of the COVID-19 lockdowns with its focus on staples, larger basket size, necessities and bulk items, and it remains an exceptional retailer in its category, with a sticky subscription base and non-U.S. growth ahead. However, the company is facing very tough comparisons as well as margin pressure in its core business and we believe its valuation has become stretched."

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Niloo / Shutterstock.com

Earlier this month, we published an article revealing that Costco Wholesale Corp. (NASDAQ:COST) was one of the 10 best stocks to buy, according to billionaire Ray Dalio.

In Q4 2020, the number of bullish hedge fund positions on Costco Wholesale Corp. (NASDAQ:COST) stock decreased by about 16% from the previous quarter (see the chart here), so a number of other hedge fund managers don't believe in COST's growth potential. Our calculations showed that Costco Wholesale Corp. (NASDAQ:COST) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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:

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