Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Target Corporation (NYSE:TGT) going to take off soon? Money managers are selling. The number of long hedge fund positions dropped by 2 lately. TGT was in 30 hedge funds’ portfolios at the end of September. There were 32 hedge funds in our database with TGT holdings at the end of the previous quarter. 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 BCE Inc. (USA) (NYSE:BCE), Infosys Ltd ADR (NYSE:INFY), and Bank of Montreal (USA) (NYSE:BMO) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
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What does the smart money think about Target Corporation (NYSE:TGT)?
Heading into the fourth quarter of 2016, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 6% from the previous quarter, and the fourth-straight quarter with a decline in the number of bullish hedge fund positions. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the most valuable position in Target Corporation (NYSE:TGT), worth close to $138.2 million. The second largest stake is held by John A. Levin of Levin Capital Strategies, with a $123.8 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Cliff Asness’ AQR Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Joel Greenblatt’s Gotham Asset Management.
Because Target Corporation (NYSE:TGT) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who were dropping their positions entirely last quarter. Intriguingly, Principal Global Investors’ Columbus Circle Investors dropped the biggest position of all the hedgies followed by Insider Monkey, worth about $93.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $49.4 million worth of TGT shares.
Let’s now take a look at hedge fund activity in other stocks similar to Target Corporation (NYSE:TGT). We will take a look at BCE Inc. (USA) (NYSE:BCE), Infosys Ltd ADR (NYSE:INFY), Bank of Montreal (USA) (NYSE:BMO), and FedEx Corporation (NYSE:FDX). 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 |
|---|---|---|---|
| BCE | 16 | 189689 | 1 |
| INFY | 20 | 822886 | -3 |
| BMO | 16 | 219051 | 1 |
| FDX | 49 | 4031572 | 3 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.32 billion. That figure was $703 million in TGT’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand BCE Inc. (USA) (NYSE:BCE) is the least popular one with only 16 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FDX might be a better candidate to consider taking a long position in.
Disclosure: None
