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 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards NiSource Inc. (NYSE:NI).
NiSource Inc. (NYSE:NI) investors should pay attention to a decrease in hedge fund interest lately. NI was in 27 hedge funds' portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with NI positions at the end of the previous quarter. Our calculations also showed that NI 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 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 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.
[caption id="attachment_25857" align="aligncenter" width="359"] George Soros of Soros Fund Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to view the fresh hedge fund action surrounding NiSource Inc. (NYSE:NI).
Hedge fund activity in NiSource Inc. (NYSE:NI)
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NI over the last 18 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in NiSource Inc. (NYSE:NI) was held by Citadel Investment Group, which reported holding $195 million worth of stock at the end of September. It was followed by Zimmer Partners with a $165.1 million position. Other investors bullish on the company included D E Shaw, Renaissance Technologies, and Adage Capital Management. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to NiSource Inc. (NYSE:NI), around 3.66% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to NI.
Since NiSource Inc. (NYSE:NI) has faced a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of funds that elected to cut their full holdings last quarter. Intriguingly, Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital dropped the biggest stake of the 750 funds followed by Insider Monkey, comprising close to $15 million in stock. Richard SchimeláandáLawrence Sapanski's fund, Cinctive Capital Management, also cut its stock, about $6.4 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as NiSource Inc. (NYSE:NI) but similarly valued. We will take a look at DaVita Inc (NYSE:DVA), Masimo Corporation (NASDAQ:MASI), BeiGene, Ltd. (NASDAQ:BGNE), and Qiagen NV (NYSE:QGEN). This group of 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 DVA,43,3657786,5 MASI,31,156950,1 BGNE,11,2174312,-5 QGEN,30,341681,-21 Average,28.75,1582682,-5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1583 million. That figure was $642 million in NI's case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 11 bullish hedge fund positions. NiSource Inc. (NYSE:NI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately NI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NI investors were disappointed as the stock returned -3.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.