The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. What do these smart investors think about NiSource Inc. (NYSE:NI)?
NiSource Inc. (NYSE:NI) investors should pay attention to an increase in hedge fund sentiment in recent months. NI was in 22 hedge funds' portfolios at the end of June. There were 18 hedge funds in our database with NI holdings at the end of the previous quarter. Our calculations also showed that NI isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 analyze the new hedge fund action encompassing NiSource Inc. (NYSE:NI).
What does smart money think about NiSource Inc. (NYSE:NI)?
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NI over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Zimmer Partners held the most valuable stake in NiSource Inc. (NYSE:NI), which was worth $378.5 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $113.5 million worth of shares. Moreover, Millennium Management, Luminus Management, and Blackstart Capital were also bullish on NiSource Inc. (NYSE:NI), allocating a large percentage of their portfolios to this stock.
Now, specific money managers have been driving this bullishness. D E Shaw, managed by D. E. Shaw, initiated the most outsized position in NiSource Inc. (NYSE:NI). D E Shaw had $20.4 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson's Adage Capital Management also initiated a $12.8 million position during the quarter. The following funds were also among the new NI investors: Matthew Tewksbury's Stevens Capital Management, Steve Cohen's Point72 Asset Management, and Benjamin A. Smith's Laurion Capital Management.
Let's also examine hedge fund activity in other stocks similar to NiSource Inc. (NYSE:NI). These stocks are Cenovus Energy Inc (NYSE:CVE), Suzano S.A. (NYSE:SUZ), Eastman Chemical Company (NYSE:EMN), and Pinnacle West Capital Corporation (NYSE:PNW). All of these stocks' market caps are similar to NI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVE,17,596864,-6 SUZ,2,35984,1 EMN,23,379858,-7 PNW,23,683747,-1 Average,16.25,424113,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $786 million in NI's case. Eastman Chemical Company (NYSE:EMN) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 2 bullish hedge fund positions. NiSource Inc. (NYSE:NI) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on NI, though not to the same extent, as the stock returned 4.6% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.