Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Costco Wholesale Corporation (NASDAQ:COST) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Costco Wholesale Corporation (NASDAQ:COST) the right investment to pursue these days? Investors who are in the know were in a bullish mood. The number of bullish hedge fund positions rose by 1 lately. Costco Wholesale Corporation (NASDAQ:COST) was in 55 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 73. Our calculations also showed that COST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ray Dalio of Bridgewater Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind let’s take a glance at the recent hedge fund action regarding Costco Wholesale Corporation (NASDAQ:COST).
Do Hedge Funds Think COST Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 73 hedge funds with a bullish position in COST a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Costco Wholesale Corporation (NASDAQ:COST) was held by Fisher Asset Management, which reported holding $1746.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $894.1 million position. Other investors bullish on the company included Arrowstreet Capital, Bridgewater Associates, and D E Shaw. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Costco Wholesale Corporation (NASDAQ:COST), around 5.98% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 4.62 percent of its 13F equity portfolio to COST.
As industrywide interest jumped, some big names have jumped into Costco Wholesale Corporation (NASDAQ:COST) headfirst. Laurion Capital Management, managed by Benjamin A. Smith, initiated the biggest call position in Costco Wholesale Corporation (NASDAQ:COST). Laurion Capital Management had $60.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $9.9 million investment in the stock during the quarter. The following funds were also among the new COST investors: Alec Litowitz and Ross Laser’s Magnetar Capital, Peter Algert’s Algert Global, and Greg Eisner’s Engineers Gate Manager.
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 Chevron Corporation (NYSE:CVX), AT&T Inc. (NYSE:T), AbbVie Inc (NYSE:ABBV), Wells Fargo & Company (NYSE:WFC), Merck & Co., Inc. (NYSE:MRK), AstraZeneca plc (NYSE:AZN), and Novartis AG (NYSE:NVS). This group of 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 |
|---|---|---|---|
| CVX | 51 | 4442202 | 1 |
| T | 66 | 3212098 | -2 |
| ABBV | 81 | 4140050 | -1 |
| WFC | 88 | 6188279 | -6 |
| MRK | 77 | 4550626 | -2 |
| AZN | 41 | 3757394 | 4 |
| NVS | 22 | 1439973 | 0 |
| Average | 60.9 | 3961517 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 60.9 hedge funds with bullish positions and the average amount invested in these stocks was $3962 million. That figure was $4393 million in COST’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Costco Wholesale Corporation (NASDAQ:COST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for COST is 53.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on COST as the stock returned 12.6% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
Follow Costco Wholesale Corp W (NASDAQ:COST)
Follow Costco Wholesale Corp W (NASDAQ:COST)
Suggested Articles:
- 10 Best Automation Stocks For 2021
- 11 Biggest Insurance Companies In The World
- 12 Best Solar Stocks for 2021
Disclosure: None. This article was originally published at Insider Monkey.
