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Is Target Corporation (TGT) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Target Corporation (NYSE:TGT) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Target Corporation (NYSE:TGT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TGT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 General Electric Company (NYSE:GE), NetEase, Inc (NASDAQ:NTES), and Duke Energy Corporation (NYSE:DUK) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are plenty of signals stock market investors employ to assess publicly traded companies. A pair of the most useful signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the S&P 500 by a very impressive amount (see the details here).

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

With all of this in mind we’re going to view the key hedge fund action surrounding Target Corporation (NYSE:TGT).

How have hedgies been trading Target Corporation (NYSE:TGT)?

At Q2’s end, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TGT over the last 20 quarters. So, let’s find out 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 $945.2 million worth of stock at the end of September. It was followed by AQR Capital Management with a $543 million position. Other investors bullish on the company included Two Sigma Advisors, D1 Capital Partners, and Holocene Advisors. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to Target Corporation (NYSE:TGT), around 5.32% of its 13F portfolio. MIK Capital is also relatively very bullish on the stock, dishing out 3.94 percent of its 13F equity portfolio to TGT.

Judging by the fact that Target Corporation (NYSE:TGT) has faced bearish sentiment from hedge fund managers, logic holds that there were a few fund managers who were dropping their positions entirely in the second quarter. Interestingly, Steven Boyd’s Armistice Capital cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $16.7 million in stock. Charles Davidson and Joseph Jacobs’s fund, Wexford Capital, also sold off its stock, about $10.8 million worth. These transactions are interesting, 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 Target Corporation (NYSE:TGT) but similarly valued. These stocks are General Electric Company (NYSE:GE), NetEase, Inc (NASDAQ:NTES), Duke Energy Corporation (NYSE:DUK), Activision Blizzard, Inc. (NASDAQ:ATVI), CME Group Inc (NASDAQ:CME), Micron Technology, Inc. (NASDAQ:MU), and Chubb Limited (NYSE:CB). All of these stocks’ market caps match TGT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GE 57 3186232 -1
NTES 38 4594320 -1
DUK 33 906929 -2
ATVI 97 3564560 -4
CME 60 2336649 -2
MU 84 4285777 -10
CB 40 1288157 7
Average 58.4 2880375 -1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.4 hedge funds with bullish positions and the average amount invested in these stocks was $2880 million. That figure was $3159 million in TGT’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 33 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 50.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. A small number of hedge funds were also right about betting on TGT as the stock returned 28.4% since the end of June and outperformed the market by an even larger margin.

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