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Is Acuity Brands, Inc. (AYI) Going to Burn These Hedge Funds?

In this article we will check out the progression of hedge fund sentiment towards Acuity Brands, Inc. (NYSE:AYI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Acuity Brands, Inc. (NYSE:AYI) a bargain? The best stock pickers are taking a bullish view. The number of long hedge fund bets increased by 2 lately. Our calculations also showed that AYI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are tons of tools shareholders put to use to analyze their holdings. A duo of the most useful tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform their index-focused peers by a solid margin (see the details here).

Alexander Roepers of Atlantic Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the key hedge fund action surrounding Acuity Brands, Inc. (NYSE:AYI).

How have hedgies been trading Acuity Brands, Inc. (NYSE:AYI)?

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in AYI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Generation Investment Management held the most valuable stake in Acuity Brands, Inc. (NYSE:AYI), which was worth $164.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $84.1 million worth of shares. AQR Capital Management, International Value Advisers, and Paradice Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Acuity Brands, Inc. (NYSE:AYI), around 5.41% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, setting aside 3.58 percent of its 13F equity portfolio to AYI.

As industrywide interest jumped, key money managers have jumped into Acuity Brands, Inc. (NYSE:AYI) headfirst. Paradice Investment Management, managed by David Paradice, created the biggest position in Acuity Brands, Inc. (NYSE:AYI). Paradice Investment Management had $48.8 million invested in the company at the end of the quarter. Clint Murray’s Lodge Hill Capital also made a $6.6 million investment in the stock during the quarter. The following funds were also among the new AYI investors: Greg Eisner’s Engineers Gate Manager, Lee Ainslie’s Maverick Capital, and Alexander Roepers’s Atlantic Investment Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Acuity Brands, Inc. (NYSE:AYI) but similarly valued. These stocks are Companhia Brasileira de Distrib. (NYSE:CBD), Qualys Inc (NASDAQ:QLYS), SL Green Realty Corp (NYSE:SLG), and CAE, Inc. (NYSE:CAE). This group of stocks’ market valuations match AYI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CBD 5 7159 -4
QLYS 17 115965 -12
SLG 23 192086 -4
CAE 20 79383 10
Average 16.25 98648 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $499 million in AYI’s case. SL Green Realty Corp (NYSE:SLG) is the most popular stock in this table. On the other hand Companhia Brasileira de Distrib. (NYSE:CBD) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Acuity Brands, Inc. (NYSE:AYI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately AYI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AYI were disappointed as the stock returned 0.7% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.