We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Target Corporation (NYSE:TGT).
Is Target Corporation (NYSE:TGT) an outstanding investment right now? Prominent investors are getting more bullish. The number of bullish hedge fund positions improved by 16 in recent months. Our calculations also showed that TGT isn’t among the 30 most popular stocks among hedge funds (see the video below). TGT was in 53 hedge funds’ portfolios at the end of September. There were 37 hedge funds in our database with TGT holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Harnisch of Peconic Partners
Let’s take a peek at the recent hedge fund action surrounding Target Corporation (NYSE:TGT).
How have hedgies been trading Target Corporation (NYSE:TGT)?
At the end of the third quarter, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TGT over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Target Corporation (NYSE:TGT) was held by Renaissance Technologies, which reported holding $444.2 million worth of stock at the end of September. It was followed by AQR Capital Management with a $301.1 million position. Other investors bullish on the company included Holocene Advisors, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Peconic Partners allocated the biggest weight to Target Corporation (NYSE:TGT), around 7.09% of its portfolio. Lomas Capital Management is also relatively very bullish on the stock, designating 4.96 percent of its 13F equity portfolio to TGT.
As industrywide interest jumped, specific money managers have been driving this bullishness. Lomas Capital Management, managed by Daniel Lascano, initiated the largest position in Target Corporation (NYSE:TGT). Lomas Capital Management had $47.9 million invested in the company at the end of the quarter. William Harnisch’s Peconic Partners also made a $30.5 million investment in the stock during the quarter. The other funds with brand new TGT positions are Benjamin A. Smith’s Laurion Capital Management, Alexander Mitchell’s Scopus Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Target Corporation (NYSE:TGT). These stocks are General Motors Company (NYSE:GM), Takeda Pharmaceutical Company Limited (NYSE:TAK), Prologis Inc (NYSE:PLD), and Vodafone Group Plc (NASDAQ:VOD). This group of stocks’ market valuations match TGT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GM | 68 | 6375993 | 19 |
| TAK | 28 | 1243754 | 1 |
| PLD | 27 | 360500 | 3 |
| VOD | 19 | 685397 | 8 |
| Average | 35.5 | 2166411 | 7.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $2166 million. That figure was $2073 million in TGT’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 19 bullish hedge fund positions. Target Corporation (NYSE:TGT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on TGT as the stock returned 19.5% during the fourth quarter (through 11/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
