UBS’ Top Quant Stocks In AI, IT, Healthcare & Other Sectors: Top 33 Stocks In All Sectors

25. Targa Resources Corp. (NYSE:TRGP)

Number of Hedge Fund Investors In Q2 2024: 39

Sector: Energy

Targa Resources Corp. (NYSE:TRGP) is a natural gas infrastructure company based in Houston, Texas. However, it is a unique gas infrastructure play in the sense that the shares are up a whopping 91% year to date. This strong performance has come at a time when over-supply in the US gas market has led to depressed prices. Amidst this turmoil, Targa Resources Corp. (NYSE:TRGP) has benefited from the fact that it is one of the biggest gas infrastructure providers in America’s Permian Basin. Permian is the hub of the US shale oil industry, and as the saying goes, where there’s oil, there’s gas as well. Targa Resources Corp. (NYSE:TRGP) has benefited from the Permian Basin’s growing share of the US natural gas market. This is evident by the fact that in 2011, the region accounted for 5.8% of US gas production and this grew to 18.6% in 2022. Targa Resources Corp. (NYSE:TRGP) benefits from its added presence in the natural gas marketing industry which enables it to gauge demand fluctuations ahead of time and adjust supply accordingly.

Targa Resources Corp. (NYSE:TRGP)’s management shared the following about the Permian Basin during the Q2 2024 earnings call:

“Activity in the Permian remains very strong, supporting our view of continued long-term growth from the basin. Our Permian volumes during the second quarter increased about 275 million cubic feet per day over the first quarter, which is a full plant. And year-over-year, our volumes in the Permian are up more than 600 million cubic feet per day. And currently, our volumes in the Permian are up another 200 million cubic feet per day compared to the second quarter. We expected strong growth from our Permian assets, but the growth we have seen this year has exceeded our expectations.

We now expect low double-digit percentage volume growth this year, which sets us up well for meaningful growth in 2025 and beyond. This higher growth rate is driving incremental EBITDA and requiring additional growth capital investment. These volumes are core to our business, and we benefit across the integrated NGL value chain, driving higher margins into our downstream business and generating strong ROIC. Given higher-than-anticipated Permian volumes and an outlook for continued strong activity across our Midland and Delaware footprint, we announced our next two plants in the Permian, one in the Midland Basin and another in the Delaware Basin. Some spending for these plans was included in the forecast we provided back in February, but the timing and cadence of spending has accelerated.”