Is NiSource Inc. (NI) Going to Burn These Hedge Funds?

Is NiSource Inc. (NYSE:NI) a buy, sell, or hold? Hedge funds are taking a pessimistic view. The number of bullish hedge fund bets decreased by 3 in recent months.

At the moment, there are dozens of methods investors can use to analyze Mr. Market. A pair of the most under-the-radar are hedge fund and insider trading activity. At Insider Monkey, our research analyses have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the broader indices by a superb margin (see just how much).

Just as important, bullish insider trading sentiment is a second way to break down the stock market universe. Obviously, there are many stimuli for an upper level exec to drop shares of his or her company, but just one, very clear reason why they would buy. Several empirical studies have demonstrated the impressive potential of this method if shareholders know where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the recent action regarding NiSource Inc. (NYSE:NI).

How have hedgies been trading NiSource Inc. (NYSE:NI)?

In preparation for this quarter, a total of 13 of the hedge funds we track were bullish in this stock, a change of -19% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly.

When looking at the hedgies we track, Millennium Management, managed by Israel Englander, holds the most valuable position in NiSource Inc. (NYSE:NI). Millennium Management has a $42.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $42.1 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds with similar optimism include David Harding’s Winton Capital Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group.

Judging by the fact that NiSource Inc. (NYSE:NI) has experienced a declination in interest from the aggregate hedge fund industry, logic holds that there were a few hedgies that elected to cut their full holdings heading into Q2. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management cut the largest position of the 450+ funds we monitor, totaling an estimated $9.6 million in stock., and Charles Clough of Clough Capital Partners was right behind this move, as the fund cut about $6.8 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds heading into Q2.

How have insiders been trading NiSource Inc. (NYSE:NI)?

Insider trading activity, especially when it’s bullish, is most useful when the company in focus has seen transactions within the past half-year. Over the latest 180-day time period, NiSource Inc. (NYSE:NI) has seen 1 unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to NiSource Inc. (NYSE:NI). These stocks are Public Service Enterprise Group Inc. (NYSE:PEG), Northeast Utilities System (NYSE:NU), CenterPoint Energy, Inc. (NYSE:CNP), Ameren Corp (NYSE:AEE), and NRG Energy Inc (NYSE:NRG). This group of stocks are in the diversified utilities industry and their market caps resemble NI’s market cap.