Is Costco Wholesale Corporation (COST) still a worthy equity investment?


ClearBridge Investments, an investment management firm, has published its letter to investors “Sustainability Leaders Strategy” for the second quarter of 2021 – a copy of which can be found downloaded here. The ClearBridge Sustainability Leaders strategy underperformed its benchmark Russell 3000 in the second quarter. In absolute terms, the Strategy recorded gains in eight of the 10 sectors in which it was invested (out of a total of 11 sectors). You can check out the top 5 holdings of the fund to get an idea of ​​their top bets for 2021.

In ClearBridge Investments’ Q2 2021 letter to investors, the fund mentioned Costco Wholesale Corporation (NASDAQ: COST) and discussed his position on the company. Costco Wholesale Corporation is an Issaquah, Wash., Big box store company with a market cap of $ 198 billion. COST has returned 18.99% year-to-date, while its 12-month returns are up 26.29%. The stock closed at $ 449.35 per share on October 1, 2021.

Here’s what ClearBridge Investments has to say about Costco Wholesale Corporation in its Q2 2021 letter to investors:

“The pandemic has created challenges for businesses large and small; a major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart and Costco ensured sufficient staffing to meet demand under difficult conditions. All three instituted improved pay practices during the pandemic, with raises, unforeseen bonuses and other perks helping to reward employees for their efforts in a difficult environment. In February 2021, Costco, which we’ve long recognized as a leader in workplace practices, increased its starting pay to $ 16 an hour; his average wage at the time was $ 24 an hour.

The increased benefits have had an impact on the margins of these companies, even though the nature of the essential services of their operations has resulted in significant inflows of sales that could offset these expenses, but we see these measures as forward-thinking management of the human capital. “

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Based on our calculations, Costco Wholesale Corporation (NASDAQ: COST) was unable to secure a spot on our list of 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) has generated a return of 12.38% in the past 3 months.

The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, lithium mining is one of the fastest growing industries right now, so we’re looking at stock locations like this. emerging lithium stocks. We go through lists like the 10 best EV stocks to choose the next Tesla which will offer a 10x return. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can subscribe to our free daily newsletter at our home page.

Disclosure: none. This article was originally published on Monkey initiate.

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