Two things are true of Targa Resources Corp. (NYSE:TRGP) at once. It carries more debt against its equity than almost anything in midstream, and it has been one of the strongest performers in the business over the past year.
The stock closed at $294.90 on October 16. It has returned 27.4% during the last 6 months, compared to a 10.5% return for the Insider Monkey Billionaire Index and 9.3% for the State Street SPDR S&P 500 ETF Trust.
Those two facts belong to the same strategy. Targa gathers gas in the Permian, strips the valuable liquids out of it and ships them to the Gulf Coast for export, and it has borrowed to build the capacity for more of the same.
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What the Borrowing Bought:
Debt stands at 515.79% of equity. In most industries, that number would be a warning. Here it is the record of a company that chose to build rather than distribute, funding plants and pipelines out of borrowings while production in the basin climbed.
The market has rewarded it. The shares are up 95.38% over the past year, which is a rare run for a business of this kind.
Targa appears in our 10 Best Pipeline and MLP Stocks to Buy According to Hedge Funds, where it is one of the few names funds added to last quarter. To see the others, click HERE.
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What It Costs to Keep:
Leverage works in one direction while volumes rise and in the other when they stop. The contracts behind Permian gathering are tied to how much comes out of the ground, and that depends on decisions made by producers rather than by Targa.
The income case is thin as well. The yield is 1.70%, slight for a sector people buy for income, partly because the shares have run so hard and partly because the cash has been going into construction rather than to owners. Anyone buying this for a cheque in the post has the wrong stock.
Paying for the Build:
The shares trade at 23.20 times what analysts expect next year against 27.06 times the past year. The market expects the spending to turn into earnings, and has already priced a good deal of that in.
What a buyer is underwriting is not the pipeline but the basin. If Permian output keeps climbing, the assets fill, and the borrowing looks clever. If it flattens, the debt stays exactly where it is.
Nobody buys Targa for the cheque. For the opposite kind of holding, 10 Energy Stocks that Pay Monthly Dividends lists names that pay every month.
Conclusion:
This is the growth position in a sector people normally buy for income, and the borrowing is how it got there. The strategy has worked so far, and the share price reflects that rather than doubting it. The risk is not that the business is bad but that it has no slack, because a company funded this way needs volumes to keep arriving on schedule. Watch what producers in the basin say about next year, since that is what fills these plants.
Market Sentiment:
Targa Resources Corp. was held by 54 hedge funds with a combined stake value of about $1.71 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 49 hedge fund holders in the previous quarter.
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This article is originally published at Insider Monkey.
