In this article we will check out the progression of hedge fund sentiment towards Targa Resources Corp (NYSE:TRGP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Targa Resources Corp (NYSE:TRGP) the right investment to pursue these days? The smart money is becoming hopeful. The number of long hedge fund bets improved by 2 lately. Our calculations also showed that TRGP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a large number of formulas shareholders employ to size up stocks. A duo of the most innovative formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can beat the market by a significant amount (see the details here).
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the latest hedge fund action encompassing Targa Resources Corp (NYSE:TRGP).
What have hedge funds been doing with Targa Resources Corp (NYSE:TRGP)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in TRGP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Targa Resources Corp (NYSE:TRGP), with a stake worth $45.8 million reported as of the end of September. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $14.8 million. Holocene Advisors, Deep Basin Capital, and Millennium 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 Yaupon Capital allocated the biggest weight to Targa Resources Corp (NYSE:TRGP), around 1.4% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, dishing out 1.33 percent of its 13F equity portfolio to TRGP.
As aggregate interest increased, key hedge funds have jumped into Targa Resources Corp (NYSE:TRGP) headfirst. AQR Capital Management, managed by Cliff Asness, assembled the most valuable position in Targa Resources Corp (NYSE:TRGP). AQR Capital Management had $4.1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2.5 million position during the quarter. The following funds were also among the new TRGP investors: Greg Eisner’s Engineers Gate Manager, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Steve Pattyn’s Yaupon Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Targa Resources Corp (NYSE:TRGP). We will take a look at LATAM Airlines Group S.A. (NYSE:LTM), Capri Holdings Limited (NYSE:CPRI), Boyd Gaming Corporation (NYSE:BYD), and Fox Factory Holding Corp (NASDAQ:FOXF). 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 |
|---|---|---|---|
| LTM | 10 | 8139 | -4 |
| CPRI | 29 | 280046 | -11 |
| BYD | 26 | 179093 | -4 |
| FOXF | 10 | 15115 | -3 |
| Average | 18.75 | 120598 | -5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $104 million in TRGP’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 10 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 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on TRGP as the stock returned 161% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
