Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of NiSource Inc. (NYSE:NI).
NiSource Inc. (NYSE:NI) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds' portfolios at the end of September. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Rollins, Inc. (NYSE:ROL), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), and Open Text Corporation (NASDAQ:OTEX) to gather more data points. Our calculations also showed that NI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are viewed as slow, old investment tools of yesteryear. While there are greater than 8000 funds trading today, We hone in on the elite of this club, approximately 750 funds. These investment experts control the lion's share of the smart money's total capital, and by tailing their inimitable stock picks, Insider Monkey has formulated many investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_255014" align="aligncenter" width="600"] Clint Carlson of Carlson Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's review the fresh hedge fund action encompassing NiSource Inc. (NYSE:NI).
How are hedge funds trading NiSource Inc. (NYSE:NI)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in NI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in NiSource Inc. (NYSE:NI) was held by Zimmer Partners, which reported holding $440.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $135.8 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to NiSource Inc. (NYSE:NI), around 4.79% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 0.45 percent of its 13F equity portfolio to NI.
Seeing as NiSource Inc. (NYSE:NI) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few fund managers who sold off their entire stakes last quarter. Interestingly, Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital dumped the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $21.2 million in stock, and Peter J. Hark's Shelter Harbor Advisors was right behind this move, as the fund dumped about $5.8 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NiSource Inc. (NYSE:NI) but similarly valued. These stocks are Rollins, Inc. (NYSE:ROL), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Open Text Corporation (NASDAQ:OTEX), and Pinnacle West Capital Corporation (NYSE:PNW). This group of stocks' market valuations are similar to NI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROL,25,306391,2 NCLH,30,1012048,-5 OTEX,14,610442,-2 PNW,24,865074,1 Average,23.25,698489,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $698 million. That figure was $812 million in NI's case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Open Text Corporation (NASDAQ:OTEX) is the least popular one with only 14 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NI investors were disappointed as the stock returned -10.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.