After going shopping for a breakout, retail giant Costco has now entered a new buy zone. Costco stock also made the latest list of new buys by the best mutual funds, joining fellow big-box retailer BJ's Wholesale Club.
Costco leads the major discount chains retailer group with a 93 Composite Rating. Target and Walmart hail from the same industry group, but they earn lower Composite Ratings of 77 and 72, respectively.
Categorized in the discount & variety retailers group, BJ's Wholesale Club tops its industry with an 87 Composite Rating, outranking peers Dollar General and Dollar Tree.
Costco Joins The IBD Leaderboard Watchlist
In the latest list of new buys by top money managers, leading institutional investors loaded up roughly $150 million worth of shares in Costco stock into their shopping carts. That has helped Costco secure a spot on the IBD Leaderboard watchlist.
Headquartered in Washington state, Costco operates 828 warehouses, including 572 in the U.S. and Puerto Rico, 105 in Canada and 40 in Mexico. Included in Costco's expansive retail empire are 30 warehouses in Japan, 29 in the United Kingdom, 16 in Korea, 14 in Taiwan, 13 in Australia, four in Spain, two each in France and China, and one in Iceland.
The big-box retailer also operates e-commerce sites in the U.S., Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.
On March 3, Costco reported second-quarter results for fiscal 2022, ended Feb. 13. Earnings growth beat analyst estimates, coming in at $2.92 per share, a 15% increase over the prior-year quarter. That marked a second quarter of EPS acceleration.
Sales growth remains solid and steady, ranging from 12% to 21% over the last seven quarters.
Further confirming strong institutional demand, Costco has posted eight straight quarters of rising fund ownership and 3,157 funds have reported a position in the stock.
COST Stock Breaks Out Into Buy Zone
In a sign of technical weakness, the 50-day moving averages for Target and Walmart have fallen below their longer-term 200-day lines. Target remains well below its 200-day line, while Walmart retook that benchmark last week. WMT stock built on that momentum Monday, rising just under 2% in below-average, but rising trade.
Meanwhile, Costco trades well above its 50-day line, as well as its 21-day exponential moving average.
Costco was featured on the IBD Breakout Stocks Index while it was setting up in the recent stock market correction. The stock went on to clear a 545.39 buy point in a cup with handle earlier this month and remains in a buy zone. The volume in the breakout, however, has been tepid as Costco has moved sideways in recent days. To kick off the new week, COST stock rose nearly 2% Monday, but again on below-average volume.
After hitting a new high right after the initial breakout, the relative strength line has drifted lower. Look for the RS line to turn up as Costco tries to build on its recent move.
BJ's Wholesale is also above its key moving averages as it looks to set up a new breakout move. The stock rose nearly 3% Monday in below-average, but rising volume.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
