3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 71
One of the best ethical companies to invest in, Costco Wholesale Corporation (NASDAQ:COST) is a warehouse club that operates on a membership basis, offering a wide range of products. Established in 1983, the company runs over 800 warehouses globally and is one the largest membership warehouse chains in the U.S.
The company provides a broad range of items such as groceries, household essentials, appliances, apparel, tires, tools, sporting equipment, beauty products, garden supplies, and electronics. Among its offerings is the Kirkland Signature private label, which is highly popular among its members.
According to a report published in 2022 by Vidyalankar School of Information Technology, Costco (NASDAQ:COST) is one of the most respected companies globally, largely due to its ethical approach to business and employee treatment. Known for its commitment to fair practices, it pays its workers around 40% more than competitors like Walmart and Target, while also offering better health and retirement benefits.
This investment in employees not only reduces turnover costs but also improves overall productivity and customer service. While talking at an event at the Michael G. Foster School of Business, co-founder and former CEO, James Sinegal emphasized that treating employees well and delivering great value to customers are key to successful business operations.
In July, the company implemented an increase in the starting pay and maximum pay for several key roles, including service assistants and meat cutters. This wage hike raises the starting hourly wage to $19.50, which represents a 5.4% increase for the lowest-paid workers. Incremental wage steps based on seniority are also set to rise by $0.50.
According to the Society for Human Resource Management, this move is designed to ensure that Costco’s (NASDAQ:COST) wages stay competitive within the retail industry, particularly when compared to the average salary increases of around 4% to 4.5% that other companies are offering for 2024.
The company’s approach to employee compensation is part of a broader strategy that includes promoting from within. The majority of its management team, including those in various departments such as warehouse and merchandise management, have been promoted from lower-level positions within the company. This commitment to internal career advancement helps the company retain skilled employees and maintain a motivated workforce. It is one of the best ethical companies to invest in.
The appeal of the company goes beyond its ethical practices, Costco’s (NASDAQ:COST) membership-based model is a significant asset. This model generates a steady and attractive revenue stream, with membership fees bringing in $1.1 billion in the third quarter of fiscal 2024, a 7.6% increase from the previous year. The predictability and stability of this income contribute to the company’s financial strength.
As of the second quarter, 71 hedge funds tracked by Insider Monkey had stakes in Costco (NASDAQ:COST), with positions worth $5.95 billion. Fisher Asset Management emerges as the company’s largest shareholder as it owns a $2.5 billion stake, as of June 30.
ClearBridge Investments stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2024 investor letter:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
