Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Costco Wholesale Corporation (NASDAQ:COST) based on that data.
Costco Wholesale Corporation (NASDAQ:COST) has seen a decrease in support from the world’s most elite money managers recently. Our calculations also showed that COST isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Warren Buffett of Berkshire Hathaway
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the new hedge fund action regarding Costco Wholesale Corporation (NASDAQ:COST).
How are hedge funds trading Costco Wholesale Corporation (NASDAQ:COST)?
Heading into the second quarter of 2020, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COST over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Berkshire Hathaway held the most valuable stake in Costco Wholesale Corporation (NASDAQ:COST), which was worth $1235.6 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $877.1 million worth of shares. D E Shaw, Renaissance Technologies, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hosking Partners allocated the biggest weight to Costco Wholesale Corporation (NASDAQ:COST), around 4.63% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 4.54 percent of its 13F equity portfolio to COST.
Due to the fact that Costco Wholesale Corporation (NASDAQ:COST) has faced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who were dropping their entire stakes in the third quarter. Intriguingly, Gregg Moskowitz’s Interval Partners said goodbye to the biggest position of all the hedgies followed by Insider Monkey, totaling about $17 million in stock, and Parvinder Thiara’s Athanor Capital was right behind this move, as the fund dumped about $15.9 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds in the third 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), Medtronic plc (NYSE:MDT), Amgen, Inc. (NASDAQ:AMGN), and NextEra Energy, Inc. (NYSE:NEE). All of these 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 | 953580 | 9 |
| MDT | 59 | 1839749 | -7 |
| AMGN | 52 | 2056537 | -6 |
| NEE | 52 | 1436389 | 6 |
| Average | 57.25 | 1571564 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.25 hedge funds with bullish positions and the average amount invested in these stocks was $1572 million. That figure was $4352 million in COST’s case. McDonald’s Corporation (NYSE:MCD) is the most popular stock in this table. On the other hand Amgen, Inc. (NASDAQ:AMGN) is the least popular one with only 52 bullish hedge fund positions. Compared to these stocks Costco Wholesale Corporation (NASDAQ:COST) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately COST wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on COST were disappointed as the stock returned 6.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
