As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Target Corporation (NYSE:TGT).
Target Corporation (NYSE:TGT) was in 66 hedge funds’ portfolios at the end of June. The all time high for this statistic is 78. TGT has seen an increase in enthusiasm from smart money in recent months. There were 60 hedge funds in our database with TGT positions at the end of the first quarter. Our calculations also showed that TGT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Gabriel Plotkin of Melvin Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to go over the key hedge fund action surrounding Target Corporation (NYSE:TGT).
Do Hedge Funds Think TGT Is A Good Stock To Buy Now?
At Q2’s end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TGT over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GQG Partners held the most valuable stake in Target Corporation (NYSE:TGT), which was worth $1430.4 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $870.4 million worth of shares. AQR Capital Management, Citadel Investment Group, and D E Shaw 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 Rip Road Capital allocated the biggest weight to Target Corporation (NYSE:TGT), around 5.69% of its 13F portfolio. GQG Partners is also relatively very bullish on the stock, earmarking 4.2 percent of its 13F equity portfolio to TGT.
Now, some big names have jumped into Target Corporation (NYSE:TGT) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, initiated the most valuable position in Target Corporation (NYSE:TGT). Melvin Capital Management had $175.3 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $45.8 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz’s Interval Partners, Simon Sadler’s Segantii Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Target Corporation (NYSE:TGT) but similarly valued. We will take a look at Caterpillar Inc. (NYSE:CAT), TotalEnergies SE (NYSE:TTE), General Electric Company (NYSE:GE), HSBC Holdings plc (NYSE:HSBC), Vale SA (NYSE:VALE), The Estee Lauder Companies Inc (NYSE:EL), and 3M Company (NYSE:MMM). This group of stocks’ market valuations are closest to TGT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAT | 62 | 5264268 | 9 |
| TTE | 15 | 1132420 | -2 |
| GE | 67 | 6087180 | -1 |
| HSBC | 11 | 212763 | -1 |
| VALE | 27 | 3573958 | -4 |
| EL | 50 | 4129744 | -9 |
| MMM | 42 | 1582540 | 1 |
| Average | 39.1 | 3140410 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $3140 million. That figure was $5865 million in TGT’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 11 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 overall hedge fund sentiment score for TGT is 84.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately TGT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TGT were disappointed as the stock returned -1% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Target Corp (NYSE:TGT)
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Disclosure: None. This article was originally published at Insider Monkey.
