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Hedge Funds Are Dumping Targa Resources Corp (TRGP)

Asma UL Husna

Does Targa Resources Corp (NYSE:TRGP) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Targa Resources Corp (NYSE:TRGP) ready to rally soon? Hedge funds are taking a bearish view. The number of long hedge fund positions were cut by 5 lately. Our calculations also showed that TRGP isn't among the 30 most popular stocks among hedge funds (see the video below). TRGP was in 18 hedge funds' portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with TRGP positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the eyes of most traders, hedge funds are perceived as underperforming, old financial tools of years past. While there are over 8000 funds trading at present, Our researchers hone in on the bigwigs of this club, approximately 750 funds. These investment experts watch over most of the smart money's total capital, and by tracking their highest performing picks, Insider Monkey has discovered various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

TRGP_oct2019

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the fresh hedge fund action surrounding Targa Resources Corp (NYSE:TRGP).

How have hedgies been trading Targa Resources Corp (NYSE:TRGP)?

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TRGP over the last 16 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

William Harnisch

More specifically, Citadel Investment Group was the largest shareholder of Targa Resources Corp (NYSE:TRGP), with a stake worth $52.2 million reported as of the end of March. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $31.4 million. Peconic Partners LLC, Senator Investment Group, and Deep Basin Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Because Targa Resources Corp (NYSE:TRGP) has witnessed a decline in interest from hedge fund managers, it's easy to see that there exists a select few funds that decided to sell off their entire stakes heading into Q3. It's worth mentioning that Israel Englander's Millennium Management dropped the largest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $73.9 million in stock. Stuart J. Zimmer's fund, Zimmer Partners, also said goodbye to its stock, about $59.9 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 5 funds heading into Q3.

Let's check out hedge fund activity in other stocks similar to Targa Resources Corp (NYSE:TRGP). These stocks are Credit Acceptance Corp. (NASDAQ:CACC), SAGE Therapeutics Inc (NASDAQ:SAGE), West Pharmaceutical Services Inc. (NYSE:WST), and Iron Mountain Incorporated (NYSE:IRM). This group of stocks' market valuations resemble TRGP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CACC,27,1103970,-1 SAGE,25,458199,-3 WST,24,318338,3 IRM,14,39316,-4 Average,22.5,479956,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $480 million. That figure was $206 million in TRGP's case. Credit Acceptance Corp. (NASDAQ:CACC) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 14 bullish hedge fund positions. Targa Resources Corp (NYSE:TRGP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on TRGP, though not to the same extent, as the stock returned 4.8% during the third quarter and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.

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