Hedge Fund Sentiment Is Stagnant On Targa Resources Corp (TRGP)

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Targa Resources Corp (NYSE:TRGP).

Targa Resources Corp (NYSE:TRGP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that TRGP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), and Morningstar, Inc. (NASDAQ:MORN) to gather more data points.

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. Now let’s review the key hedge fund action surrounding Targa Resources Corp (NYSE:TRGP).

Do Hedge Funds Think TRGP Is A Good Stock To Buy Now?

At third quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in TRGP a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Zimmer Partners was the largest shareholder of Targa Resources Corp (NYSE:TRGP), with a stake worth $192.5 million reported as of the end of September. Trailing Zimmer Partners was Millennium Management, which amassed a stake valued at $74.3 million. Citadel Investment Group, Point72 Asset Management, and SIR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Targa Resources Corp (NYSE:TRGP), around 5.09% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, dishing out 3.03 percent of its 13F equity portfolio to TRGP.

Judging by the fact that Targa Resources Corp (NYSE:TRGP) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of money managers who were dropping their full holdings last quarter. Intriguingly, Donald Sussman’s Paloma Partners dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $3.2 million in stock. Karim Abbadi and Edward McBride’s fund, Centiva Capital, also cut its stock, about $2.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Targa Resources Corp (NYSE:TRGP) but similarly valued. We will take a look at Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR), Invesco Ltd. (NYSE:IVZ), Kirkland Lake Gold Ltd. (NYSE:KL), and Wix.Com Ltd (NASDAQ:WIX). This group of stocks’ market valuations match TRGP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $654 million. That figure was $567 million in TRGP’s case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Targa Resources Corp (NYSE:TRGP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TRGP is 58.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately TRGP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TRGP were disappointed as the stock returned 6.2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.