Is AYI A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Acuity Brands, Inc. (NYSE:AYI).

Is AYI a good stock to buy now? Acuity Brands, Inc. (NYSE:AYI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 38 hedge funds’ portfolios at the end of September. 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 for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Virgin Galactic Holdings, Inc. (NYSE:SPCE), Wingstop Inc (NASDAQ:WING), and Medallia, Inc. (NYSE:MDLA) to gather more data points.

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

At the moment there are several signals stock traders put to use to appraise their stock investments. Some of the less known signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a very impressive margin (see the details here).

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to analyze the key hedge fund action surrounding Acuity Brands, Inc. (NYSE:AYI).

Do Hedge Funds Think AYI Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in AYI a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Acuity Brands, Inc. (NYSE:AYI) was held by Generation Investment Management, which reported holding $365.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $112.5 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Paradice Investment Management. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Acuity Brands, Inc. (NYSE:AYI), around 5.93% of its 13F portfolio. Iszo Capital is also relatively very bullish on the stock, designating 5.93 percent of its 13F equity portfolio to AYI.

Due to the fact that Acuity Brands, Inc. (NYSE:AYI) has experienced falling interest from hedge fund managers, logic holds that there exists a select few hedge funds that elected to cut their entire stakes by the end of the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group sold off the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $24.3 million in stock, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS was right behind this move, as the fund dropped about $5.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Acuity Brands, Inc. (NYSE:AYI) but similarly valued. These stocks are Virgin Galactic Holdings, Inc. (NYSE:SPCE), Wingstop Inc (NASDAQ:WING), Medallia, Inc. (NYSE:MDLA), IDACORP Inc (NYSE:IDA), LendingTree, Inc (NASDAQ:TREE), Cullen/Frost Bankers, Inc. (NYSE:CFR), and Cyberark Software Ltd (NASDAQ:CYBR). This group of stocks’ market valuations are closest to AYI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPCE 24 76924 2
WING 32 365263 4
MDLA 24 382834 6
IDA 31 227986 9
TREE 20 68556 5
CFR 19 39453 6
CYBR 25 234808 8
Average 25 199403 5.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $836 million in AYI’s case. Wingstop Inc (NASDAQ:WING) is the most popular stock in this table. On the other hand Cullen/Frost Bankers, Inc. (NYSE:CFR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Acuity Brands, Inc. (NYSE:AYI) is more popular among hedge funds. Our overall hedge fund sentiment score for AYI is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on AYI as the stock returned 14.1% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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