Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider NiSource Inc. (NYSE:NI) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is NiSource Inc. (NYSE:NI) a buy right now? Hedge funds are becoming more confident. The number of long hedge fund bets rose by 2 in recent months. Our calculations also showed that NI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action encompassing NiSource Inc. (NYSE:NI).
How have hedgies been trading NiSource Inc. (NYSE:NI)?
At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in NI a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the biggest position in NiSource Inc. (NYSE:NI). Zimmer Partners has a $185.9 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $146.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Blackstart Capital allocated the biggest weight to NiSource Inc. (NYSE:NI), around 6.57% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 2.57 percent of its 13F equity portfolio to NI.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, assembled the most outsized position in NiSource Inc. (NYSE:NI). Blackstart Capital had $15 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also made a $6.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter J. Hark’s Shelter Harbor Advisors, Benjamin A. Smith’s Laurion Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s also examine hedge fund activity in other stocks similar to NiSource Inc. (NYSE:NI). We will take a look at Trimble Inc. (NASDAQ:TRMB), CF Industries Holdings, Inc. (NYSE:CF), Avantor, Inc. (NYSE:AVTR), and Mylan N.V. (NASDAQ:MYL). All of these stocks’ market caps are closest to NI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRMB | 30 | 649207 | 2 |
| CF | 41 | 1003526 | -1 |
| AVTR | 28 | 833100 | 1 |
| MYL | 47 | 1849229 | 12 |
| Average | 36.5 | 1083766 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1084 million. That figure was $727 million in NI’s case. Mylan N.V. (NASDAQ:MYL) is the most popular stock in this table. On the other hand Avantor, Inc. (NYSE:AVTR) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks NiSource Inc. (NYSE:NI) is even less popular than AVTR. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on NI, though not to the same extent, as the stock returned -24.3% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
