Hedge Funds Are Selling NiSource Inc. (NI)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about NiSource Inc. (NYSE:NI) in this article.

NiSource Inc. (NYSE:NI) has seen a decrease in hedge fund sentiment of late. NiSource Inc. (NYSE:NI) was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 36. There were 36 hedge funds in our database with NI holdings at the end of June. Our calculations also showed that NI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s go over the fresh hedge fund action surrounding NiSource Inc. (NYSE:NI).

Do Hedge Funds Think NI Is A Good Stock To Buy Now?

At third quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards NI over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is NI A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of NiSource Inc. (NYSE:NI), with a stake worth $128.9 million reported as of the end of September. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $86.1 million. Renaissance Technologies, Empyrean Capital Partners, and Zimmer Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to NiSource Inc. (NYSE:NI), around 6.8% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, earmarking 1.97 percent of its 13F equity portfolio to NI.

Because NiSource Inc. (NYSE:NI) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds that elected to cut their positions entirely heading into Q4. Interestingly, D. E. Shaw’s D E Shaw cut the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $18.7 million in stock. Franklin Parlamis’s fund, Aequim Alternative Investments, also said goodbye to its stock, about $8.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 12 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to NiSource Inc. (NYSE:NI). These stocks are TFI International Inc. (NYSE:TFII), The Middleby Corporation (NASDAQ:MIDD), Altice USA, Inc. (NYSE:ATUS), CAE, Inc. (NYSE:CAE), China Southern Airlines Co Ltd (NYSE:ZNH), Newell Brands Inc. (NYSE:NWL), and Texas Pacific Land Trust (NYSE:TPL). This group of stocks’ market valuations match NI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TFII 23 270343 10
MIDD 29 567959 -6
ATUS 59 1167928 15
CAE 7 83687 -3
ZNH 3 8197 1
NWL 26 1635531 1
TPL 24 1973702 3
Average 24.4 815335 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $436 million in NI’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 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. Our overall hedge fund sentiment score for NI is 31.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately NI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NI investors were disappointed as the stock returned 7.6% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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