Hedge Fund Sentiment Says To Steer Clear Of These 2 Trending Stocks

Earnings season is nearly upon us in full force, and Acuity Brands, Inc. (NYSE:AYI) and RPM International Inc. (NYSE:RPM) are two of the latest companies to release their quarterly results just ahead of the crush. We’ll dig into the results these two companies posted as well as how elite investors felt about them heading into the third quarter.

Let’s start with Acuity Brands, Inc. (NYSE:AYI), a $7.67 billion provider of indoor and outdoor lighting for both the commercial and residential markets. Acuity Brands released its fourth quarter and fiscal 2015 full year results this morning, reporting records for both sales and diluted earnings per share for both the quarter and the year. In terms of revenue, Acuity Brands pulled in $759.5 million in its fiscal fourth quarter, beating consensus estimates by $4.6 million as well as its revenue for the same quarter a year ago by $90.8 million. EPS for the quarter came in at $1.63, a beat of $0.01, while diluted EPS was $1.38, an increase of $0.12 from a year ago. The company reported broad sales growth across most product categories and geographical locations, despite a reduction in the sales price of some of its LED light fixtures. Shares are up by 2.00% today following the beats, which continues the trend of Acuity Brands beating estimates.

Hedge funds tracked by Insider Monkey were rather bearish towards Acuity Brands, Inc. (NYSE:AYI) in the second quarter however, as the number of investors holding long positions declined by five to 27, while the aggregate value of their holdings slid by $95.4 million to $365.51 million despite the stock appreciating by about 7% during the quarter. After strong first quarter gains of 20%, it appears investors may have felt the easy money was made and were moving capital into other stocks. Those investors have thus far been right, as shares of Acuity Brands were flat in the third quarter.

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Ken Heebner’s Capital Growth Management was the largest shareholder of Acuity Brands in our database on June 30, owning 530,000 shares worth $95.39 million. Israel Englander’s Millennium Management was one of the funds to move on from the stock after reaping its first quarter rewards, selling its position of over 192,000 shares during the second quarter.

Let’s check out RPM International Inc. (NYSE:RPM) now, which operates in the basic materials sector. RPM was not as fortunate as Acuity Brands, as it missed estimates for both its quarterly revenue and earnings. RPM International reported earnings of $0.74 per share for its first quarter of fiscal year 2016, missing estimates by $0.08. Its revenue of $1.27 billion was also $30 million short of analysts’ expectations. RPM also updated its fiscal year 2016 guidance to earnings of $2.50 per share, below estimates of $2.56. The resulting disappointment has not been overly hard on the stock however, as it has fallen only marginally in trading this morning.

The company is optimistic about its performance and market share growth in the remaining quarters of the year, citing the strong U.S dollar coupled with rainy weather in North America as reasons for its “tepid” first quarter results. The smart money we follow won’t be holding its collective breath, as it’s not particularly bullish on the company. As of June 30, 23 investors held $154.71 million of RPM International Inc. (NYSE:RPM)’s shares, just 2.40% of its outstanding shares. The number of investors and the value of their combined holdings also declined from 29 and $217.76 million respectively during the second quarter, with the decline in value occurring despite shares rising slightly during the period.

Anand Parekh’s Alyeska Investment Group was an investor who was bullish on the company, owning 856,842 shares, up by 23% during the quarter. SG Capital Management and Adage Capital Management also opened positions of at least 200,000 shares each during the quarter. On the other hand, Englander also closed a long position in this stock during the second quarter, one which had contained 621,131 shares on March 31. Shares of RPM were down by 14% in the third quarter.

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