Hedge Funds Are Cashing Out Of Target Corporation (TGT)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Target Corporation (NYSE:TGT).

Is Target Corporation (NYSE:TGT) a worthy stock to buy now? The smart money was reducing their bets on the stock. The number of long hedge fund bets retreated by 18 lately. Target Corporation (NYSE:TGT) was in 60 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 78. Our calculations also showed that TGT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most traders, hedge funds are seen as slow, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the leaders of this group, approximately 850 funds. These investment experts watch over most of all hedge funds’ total capital, and by tailing their finest equity investments, Insider Monkey has spotted a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Robert Pohly of Samlyn Capital

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

At the end of March, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in TGT over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GQG Partners held the most valuable stake in Target Corporation (NYSE:TGT), which was worth $791.4 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $710.3 million worth of shares. AQR Capital Management, D E Shaw, and Samlyn Capital 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 Rip Road Capital allocated the biggest weight to Target Corporation (NYSE:TGT), around 6.73% of its 13F portfolio. Cartenna Capital is also relatively very bullish on the stock, designating 4.35 percent of its 13F equity portfolio to TGT.

Since Target Corporation (NYSE:TGT) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that decided to sell off their full holdings heading into Q2. At the top of the heap, Daniel Sundheim’s D1 Capital Partners dropped the largest investment of all the hedgies watched by Insider Monkey, valued at an estimated $634.7 million in stock, and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management was right behind this move, as the fund sold off about $126.4 million worth. These moves are interesting, as total hedge fund interest was cut by 18 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to Target Corporation (NYSE:TGT). These stocks are Micron Technology, Inc. (NASDAQ:MU), CVS Health Corporation (NYSE:CVS), ServiceNow Inc (NYSE:NOW), Diageo plc (NYSE:DEO), Booking Holdings Inc. (NASDAQ:BKNG), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Altria Group Inc (NYSE:MO). This group of stocks’ market valuations are similar to TGT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MU 100 7621579 0
CVS 62 1315655 6
NOW 98 6127672 2
DEO 22 724467 -1
BKNG 103 6810305 -5
AMD 62 3703315 -12
MO 38 1109493 1
Average 69.3 3916069 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 69.3 hedge funds with bullish positions and the average amount invested in these stocks was $3916 million. That figure was $4761 million in TGT’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 bullish hedge fund positions. Target Corporation (NYSE:TGT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TGT is 33.5. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on TGT as the stock returned 18% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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