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 more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards Acuity Brands, Inc. (NYSE:AYI).
Acuity Brands, Inc. (NYSE:AYI) investors should be aware of an increase in support from the world’s most elite money managers of late. AYI was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with AYI holdings at the end of the previous quarter. Our calculations also showed that AYI 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Blood of Generation Investment Management
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. We’re going to check out the fresh hedge fund action regarding Acuity Brands, Inc. (NYSE:AYI).
How have hedgies been trading Acuity Brands, Inc. (NYSE:AYI)?
Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. On the other hand, there were a total of 35 hedge funds with a bullish position in AYI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Acuity Brands, Inc. (NYSE:AYI) was held by Generation Investment Management, which reported holding $353.1 million worth of stock at the end of September. It was followed by International Value Advisers with a $190.8 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position International Value Advisers allocated the biggest weight to Acuity Brands, Inc. (NYSE:AYI), around 7.07% of its portfolio. Bronson Point Partners is also relatively very bullish on the stock, earmarking 2.81 percent of its 13F equity portfolio to AYI.
As industrywide interest jumped, key money managers have jumped into Acuity Brands, Inc. (NYSE:AYI) headfirst. Carlson Capital, managed by Clint Carlson, initiated the biggest position in Acuity Brands, Inc. (NYSE:AYI). Carlson Capital had $3.4 million invested in the company at the end of the quarter. Larry Foley and Paul Farrell’s Bronson Point Partners also made a $2.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Brandon Haley’s Holocene Advisors, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Acuity Brands, Inc. (NYSE:AYI). We will take a look at Quanta Services Inc (NYSE:PWR), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), The Hanover Insurance Group, Inc. (NYSE:THG), and Exelixis, Inc. (NASDAQ:EXEL). All of these stocks’ market caps match AYI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PWR | 30 | 881523 | 1 |
| LECO | 16 | 256053 | -6 |
| THG | 25 | 272433 | 5 |
| EXEL | 27 | 681846 | 6 |
| Average | 24.5 | 522964 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $523 million. That figure was $898 million in AYI’s case. Quanta Services Inc (NYSE:PWR) is the most popular stock in this table. On the other hand Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is the least popular one with only 16 bullish hedge fund positions. Acuity Brands, Inc. (NYSE:AYI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 AYI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AYI were disappointed as the stock returned -2.9% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
