We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Acuity Brands, Inc. (NYSE:AYI), and what that likely means for the prospects of the company and its stock.
Is Acuity Brands, Inc. (NYSE:AYI) a buy, sell, or hold? Investors who are in the know are selling. The number of bullish hedge fund bets fell by 2 recently. At the end of this article we will also compare AYI to other stocks including Vantiv Inc (NYSE:VNTV), SCANA Corporation (NYSE:SCG), and ServiceNow Inc (NYSE:NOW) to get a better sense of its popularity.
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What have hedge funds been doing with Acuity Brands, Inc. (NYSE:AYI)?
Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, an 8% drop from the second quarter of 2016. After a steep drop in ownership in Q1, the stock regained some momentum in Q2 but was unable to build on it in Q3. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the biggest position in Acuity Brands, Inc. (NYSE:AYI), worth close to $305.6 million, corresponding to 2.6% of its total 13F portfolio. The second most bullish fund manager is Phill Gross and Robert Atchinson of Adage Capital Management, with a $53.7 million position. Other peers that hold long positions consist of Principal Global Investors’ Columbus Circle Investors, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’ AQR Capital Management.
Because Acuity Brands, Inc. (NYSE:AYI) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds that slashed their entire stakes heading into Q4. Interestingly, Ken Griffin’s Citadel Investment Group cut the biggest position of the 700 funds tracked by Insider Monkey, valued at about $10.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $6.9 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Acuity Brands, Inc. (NYSE:AYI) but similarly valued. We will take a look at Vantiv Inc (NYSE:VNTV), SCANA Corporation (NYSE:SCG), ServiceNow Inc (NYSE:NOW), and AMETEK, Inc. (NYSE:AME). This group of stocks’ market caps are similar to AYI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $722 million. That figure was $577 million in AYI’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand SCANA Corporation (NYSE:SCG) is the least popular one with only 18 bullish hedge fund positions. Acuity Brands, Inc. (NYSE:AYI) 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. In this regard NOW might be a better candidate to consider a long position in.