At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Target Corporation (NYSE:TGT).
Is Target Corporation (NYSE:TGT) a healthy stock for your portfolio? Hedge funds are in a bullish mood. The number of bullish hedge fund positions inched up by 1 in recent months. Our calculations also showed that TGT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TGT was in 54 hedge funds' portfolios at the end of March. There were 53 hedge funds in our database with TGT holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_340081" align="aligncenter" width="400"] Phill Gross of Adage Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a peek at the fresh hedge fund action encompassing Target Corporation (NYSE:TGT).
Hedge fund activity in Target Corporation (NYSE:TGT)
Heading into the second quarter of 2020, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in TGT a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the number one position in Target Corporation (NYSE:TGT). Renaissance Technologies has a $651.6 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $413.1 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Phill Gross and Robert Atchinson's Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to Target Corporation (NYSE:TGT), around 6.15% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, dishing out 4.47 percent of its 13F equity portfolio to TGT.
Consequently, key hedge funds have been driving this bullishness. Junto Capital Management, managed by James Parsons, established the most outsized position in Target Corporation (NYSE:TGT). Junto Capital Management had $35.8 million invested in the company at the end of the quarter. Robert Bishop's Impala Asset Management also initiated a $33.2 million position during the quarter. The following funds were also among the new TGT investors: Steven Boyd's Armistice Capital, Benjamin A. Smith's Laurion Capital Management, and Ian Simm's Impax Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Target Corporation (NYSE:TGT) but similarly valued. These stocks are Brookfield Asset Management Inc. (NYSE:BAM), CNOOC Limited (NYSE:CEO), Activision Blizzard, Inc. (NASDAQ:ATVI), and Boston Scientific Corporation (NYSE:BSX). This group of stocks' market valuations match TGT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAM,37,886441,3 CEO,11,178140,-3 ATVI,101,3053805,25 BSX,59,3081420,5 Average,52,1799952,7.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $1800 million. That figure was $2209 million in TGT's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on TGT as the stock returned 27% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.