While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Costco Wholesale Corporation (NASDAQ:COST).
Is Costco Wholesale Corporation (NASDAQ:COST) a good investment now? Money managers were taking an optimistic view. The number of long hedge fund bets improved by 12 in recent months. Costco Wholesale Corporation (NASDAQ:COST) was in 73 hedge funds’ portfolios at the end of September. The all time high for this statistics is 70. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that COST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 61 hedge funds in our database with COST positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a multitude of metrics stock market investors employ to appraise their stock investments. A duo of the most innovative metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a significant margin (see the details here).
Ray Dalio of Bridgewater Associates
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What does smart money think about Costco Wholesale Corporation (NASDAQ:COST)?
At third quarter’s end, a total of 73 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. By comparison, 63 hedge funds held shares or bullish call options in COST a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Costco Wholesale Corporation (NASDAQ:COST) was held by Fisher Asset Management, which reported holding $1203.8 million worth of stock at the end of September. It was followed by D E Shaw with a $649.5 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Costco Wholesale Corporation (NASDAQ:COST), around 4.87% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 4.48 percent of its 13F equity portfolio to COST.
As one would reasonably expect, key money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most valuable position in Costco Wholesale Corporation (NASDAQ:COST). Two Sigma Advisors had $288.1 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $77.6 million position during the quarter. The other funds with brand new COST positions are Anand Parekh’s Alyeska Investment Group, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Costco Wholesale Corporation (NASDAQ:COST) but similarly valued. These stocks are ASML Holding N.V. (NASDAQ:ASML), AbbVie Inc (NYSE:ABBV), Danaher Corporation (NYSE:DHR), Amgen, Inc. (NASDAQ:AMGN), Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks’ market values resemble COST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASML | 23 | 2057327 | -2 |
| ABBV | 82 | 6293077 | -7 |
| DHR | 75 | 4702628 | -1 |
| AMGN | 45 | 1220712 | -6 |
| AVGO | 59 | 2374856 | 0 |
| XOM | 52 | 1380236 | -1 |
| UPS | 57 | 1731232 | 20 |
| Average | 56.1 | 2822867 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.1 hedge funds with bullish positions and the average amount invested in these stocks was $2823 million. That figure was $3850 million in COST’s case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 23 bullish hedge fund positions. Costco Wholesale Corporation (NASDAQ:COST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COST is 82.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on COST, though not to the same extent, as the stock returned 9.6% since Q3 (through November 27th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
