All three major indexes are in the green this morning despite the ADP reporting that private payrolls in the U.S. rose by 154,000 for the month of September, versus the Street estimate of 165,000. WTI futures nearing $50 per barrel on a solid API report yesterday could be one reason for the relative strength.
In this article, we will take a closer look at five stocks traders are buzzing about, Monsanto Company (NYSE:MON), RPM International Inc. (NYSE:RPM), Acuity Brands, Inc. (NYSE:AYI), AZZ Inc (NYSE:AZZ), and Netflix, Inc. (NASDAQ:NFLX). We will also see how the smart money was positioned towards each stock.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
Monsanto Company (NYSE:MON) is in the spotlight after the company reported fiscal fourth-quarter earnings of $0.07 per share on revenue of $2.56 billion, beating the consensus estimates by $0.09 and $320 million, respectively. Sales advanced by 8.5% year-over-year, helped by higher volumes in the corn seed division. For full fiscal 2017, Monsanto Company expects EPS between $4.50 and $4.90 per share. Although that’s lower than the Street estimate of $4.92 per share, shares of the company are relatively unchanged. Monsanto agreed to sell itself to Bayer for $128 per share in cash in a deal that should close by the end of next year (if approved by regulators). Dan Loeb‘s Third Point established a new stake of 2 million shares in Monsanto Company (NYSE:MON) during the second quarter.
RPM International Inc. (NYSE:RPM) earned $0.83 per share in its fiscal first quarter, beating the estimates by $0.02 per share. Revenue came in at $1.25 billion, up by 0.8% year-over-year, and $20 million below the Street’s consensus estimate. Revenues fell short of expectations mainly due to the strong dollar, the weak energy market, and the soft global macro-economy. In terms of guidance, RSM International’s management continues to expect full fiscal 2017 diluted EPS between $2.68 and $2.78. The number of funds from our database with holdings in RPM International Inc. (NYSE:RPM) fell by one quarter-over-quarter to 21 at the end of June.
On the next page, we examine Acuity Brands, AZZ, and Netflix.
Acuity Brands, Inc. (NYSE:AYI) is in the red after the company reported soft fiscal fourth-quarter results. During the period, Acuity Brands earned $2.21 per share, missing the Street’s consensus estimate by $0.06 per share. Sales came in at $925.5 million, up by 21.9% year-over-year, but $22.76 million below the consensus estimate. CEO Vernon Nagel said:
“We estimate these short-term labor issues resulted in cancelled orders and lost contribution margin on more than $25 million of net sales and caused us to incur additional overtime and other costs in excess of $2 million in the quarter. The actions implemented during the fourth quarter are expected to have significant benefits to our business as we go forward.”
Acuity Brands’ management estimates that growth rate for lighting and energy management solutions in the North American market, which comprises over 97% of the company’s sales, will be in the mid-to-upper single digit range in fiscal 2017. A total of 25 funds tracked by us owned shares of Acuity Brands, Inc. (NYSE:AYI) at the end of the second quarter, up by three funds from the previous quarter.
AZZ Inc (NYSE:AZZ) reported EPS of $0.55 on revenue of $195 million for its fiscal second quarter, missing the consensus estimates by $0.14 and $27.05 million, respectively. Revenue declined by 9% year-over-year, as soft demand from the oil sector continued to weigh on overall results. Shares of the stock are currently in the red as investors didn’t like the results and the fact that the company will suspend earnings and sales guidance for a short period. However, AZZ’s management did add that their outlook for fiscal 2017 was for results to ‘fall slightly’ below the past guidance of $3.15 to $3.45 in EPS and $930 million to $970 million in sales. Of the 749 funds we track, nine funds owned $19.07 million worth of AZZ Inc (NYSE:AZZ)’s stock at the end of June, versus 10 funds and $24.44 million, respectively, a quarter earlier.
The line between Netflix, Inc. (NASDAQ:NFLX) and a traditional movie/TV producer has gotten even blurrier after Netflix signed an agreement with iPic Entertainment, a luxury movie chain with 15 multiplexes, to show its original movies in the theaters of the chain on the same day they are initially released on Netflix. The theaters in question are in NYC and LA, although Netflix has the option of showing its original movies at 13 of iPic’s other locations. Philippe Laffont‘s Coatue Management held almost 5.0 million shares of Netflix, Inc. (NASDAQ:NFLX) at the end of the second quarter.