ClearBridge Investments, an investment management firm, published its “Sustainability Leaders Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Sustainability Leaders Strategy underperformed its Russell 3000 Index benchmark during the second quarter. On an absolute basis, the Strategy had gains in eight of 10 sectors in which it was invested (out of 11 sectors total). You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Costco Wholesale Corporation (NASDAQ: COST) and discussed its stance on the firm. Costco Wholesale Corporation is an Issaquah, Washington-based big-box store company with a $198 billion market capitalization. COST delivered an 18.99% return since the beginning of the year, while its 12-month returns are up by 26.29%. The stock closed at $449.35 per share on October 01, 2021.
Here is what ClearBridge Investments has to say about Costco Wholesale Corporation in its Q2 2021 investor letter:
“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In February 2021 Costco, which we have long acknowledged as a leader in workplace practices, raised its starting wage to $16 an hour; its average wage at the time was $24 an hour.
The expanded benefits have meant a hit to margins for these companies, even while the essential services nature of their businesses has meant large influxes in sales that could offset these outlays, but we view the moves as forward-thinking human capital management.”
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Based on our calculations, Costco Wholesale Corporation (NASDAQ: COST) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. COST was in 54 hedge fund portfolios at the end of the first half of 2021, compared to 56 funds in the previous quarter. Costco Wholesale Corporation (NASDAQ: COST) delivered a 12.38% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
