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Market Update

Which Funds Have the Biggest Target Stock Exposure?

These growth funds and value-tilting dividend strategies had the largest weights in the stock.

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Target (TGT) reported lower-than-expected earnings on Wednesday, and the news sent shares spiraling. The 24.9% drop was the second-worst day for the stock in its 55-year history.

But for investors in diversified U.S. mutual funds and exchange-traded funds, the impact of the stock's sharp decline was minimal. Target represents only a 0.30% weight in the $367 billion SPDR S&P 500 ETF (SPY) and a 0.26% weight in the $295 billion Vanguard Total Stock Market Index (VTSAX). Among narrower sector indexes, Target plays a larger part. In the SPDR S&P Retail ETF (XRT), Target takes up a 1.1% weight. The fund fell 8.3% today, while SPY dropped 4.0%.

A line chart of the one-week performances of Target, SPDR S&P 500 ETF Trust, and SPDR S&P Retail ETF.

Funds that hold larger positions in Target include both growth-stock strategies and value funds, especially dividend strategies. "Target has been considered both a growth and a value stock by different investors," says Dan Lefkovitz, a strategist for Morningstar Indexes. "In recent years, the stock has displayed both growth and value characteristics on metrics like price/earnings, price/cash, sales growth, and cash flow growth." 

Smead Value (SMVLX) registers the largest Target stake with 5.73% of its portfolio allocated to the company as of April 30.

Columbia Large Cap Growth Opportunity (NFEPX), which runs a relatively concentrated portfolio of 54 names, held 4.27% in Target as of the end of March. This fund carries a Morningstar Analyst Rating of Neutral. 

With a dividend yield of 1.7% and a history of growing its payout to shareholders, Target is a holding among many dividend funds. That includes AMG River Road Dividend All Cap Value (ARDEX), which had a 2.8% weighting at the end of April. This fund is a "mostly defensive, dividend-oriented strategy," writes Morningstar associate director Tony Thomas.

A table of the active funds most exposed to Target.

Among passive funds, VictoryShares US Multi-Factor Minimum Volatility ETF (VSMV) was the most exposed with Target making up 3.2% of the portfolio. The fund follows an index that screens for earnings quality, momentum, profitability, and valuation and is rebalanced semiannually. 

Target's historically strong balance sheet and earnings growth also made it a popular holding in ETFs that focus on quality stocks. American Century U.S. Quality Growth ETF (QGRO) held 2.8% in the company, and Invesco S&P 500 Quality ETF (SPHQ) held slightly less at 1.8%. Morningstar associate analyst Lan Anh Tran writes that the companies featured in SPHQ's lineup tend to be established business with strong and stable cash flows.

A table of the passive funds most exposed to Target.

Katherine Lynch does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.