Targa Resources Corp (TRGP): Hedge Funds Are Snapping Up

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Targa Resources Corp (NYSE:TRGP) to find out whether there were any major changes in hedge funds’ views.

Is Targa Resources Corp (NYSE:TRGP) a great investment now? Money managers were getting more optimistic. The number of long hedge fund bets advanced by 2 in recent months. Targa Resources Corp (NYSE:TRGP) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. Our calculations also showed that TRGP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 24 hedge funds in our database with TRGP positions at the end of the first quarter.

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.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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. With all of this in mind we’re going to check out the recent hedge fund action regarding Targa Resources Corp (NYSE:TRGP).

Do Hedge Funds Think TRGP Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the first quarter of 2020. By comparison, 31 hedge funds held shares or bullish call options in TRGP a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Zimmer Partners was the largest shareholder of Targa Resources Corp (NYSE:TRGP), with a stake worth $143.2 million reported as of the end of June. Trailing Zimmer Partners was Schonfeld Strategic Advisors, which amassed a stake valued at $32.7 million. Point72 Asset Management, Millennium Management, and Two Sigma Advisors 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 SIR Capital Management allocated the biggest weight to Targa Resources Corp (NYSE:TRGP), around 3.63% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, designating 1.93 percent of its 13F equity portfolio to TRGP.

With a general bullishness amongst the heavyweights, key money managers have jumped into Targa Resources Corp (NYSE:TRGP) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Targa Resources Corp (NYSE:TRGP). Balyasny Asset Management had $11.5 million invested in the company at the end of the quarter. James Dondero’s Highland Capital Management also initiated a $5.9 million position during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Till Bechtolsheimer’s Arosa Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Targa Resources Corp (NYSE:TRGP) but similarly valued. These stocks are Asana Inc. (NYSE:ASAN), Hubbell Incorporated (NYSE:HUBB), Erie Indemnity Company (NASDAQ:ERIE), Everest Re Group Ltd (NYSE:RE), Gerdau SA (NYSE:GGB), Robert Half International Inc. (NYSE:RHI), and Jones Lang LaSalle Inc (NYSE:JLL). This group of stocks’ market caps are closest to TRGP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $563 million. That figure was $388 million in TRGP’s case. Jones Lang LaSalle Inc (NYSE:JLL) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 15 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 overall hedge fund sentiment score for TRGP is 63.7. 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 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on TRGP as the stock returned 25.6% since the end of Q2 (through 10/15) 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.