The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Targa Resources Corp (NYSE:TRGP) from the perspective of those elite funds.
Targa Resources Corp (NYSE:TRGP) has seen a decrease in hedge fund interest lately. TRGP was in 23 hedge funds’ portfolios at the end of the first quarter of 2019. There were 35 hedge funds in our database with TRGP holdings at the end of the previous quarter. Our calculations also showed that trgp isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the new hedge fund action encompassing Targa Resources Corp (NYSE:TRGP).
Hedge fund activity in Targa Resources Corp (NYSE:TRGP)
At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in TRGP over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in Targa Resources Corp (NYSE:TRGP). Millennium Management has a $73.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Peconic Partners LLC, managed by William Harnisch, which holds a $71 million position; the fund has 4.8% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Stuart J. Zimmer’s Zimmer Partners, and Jim Simons’s Renaissance Technologies.
Since Targa Resources Corp (NYSE:TRGP) has faced falling interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that slashed their entire stakes in the third quarter. At the top of the heap, Zach Schreiber’s Point State Capital said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $51.9 million in stock. Charles Davidson and Joseph Jacobs’s fund, Wexford Capital, also said goodbye to its stock, about $26.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 12 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Targa Resources Corp (NYSE:TRGP). We will take a look at UGI Corp (NYSE:UGI), Avery Dennison Corporation (NYSE:AVY), FactSet Research Systems Inc. (NYSE:FDS), and Tapestry, Inc. (NYSE:TPR). This group of stocks’ market values are closest to TRGP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UGI | 20 | 441954 | -4 |
| AVY | 23 | 314167 | -5 |
| FDS | 18 | 250889 | -2 |
| TPR | 29 | 372102 | -9 |
| Average | 22.5 | 344778 | -5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $335 million in TRGP’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 18 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. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TRGP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TRGP were disappointed as the stock returned -3.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
