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Acuity Brands, Inc. (AYI): Hedge Funds Are Taking Some Chips Off The Table

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Acuity Brands, Inc. (NYSE:AYI).

Is Acuity Brands, Inc. (NYSE:AYI) a buy right now? The smart money was turning less bullish. The number of long hedge fund bets were cut by 7 lately. Acuity Brands, Inc. (NYSE:AYI) was in 26 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that AYI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to check out the latest hedge fund action encompassing Acuity Brands, Inc. (NYSE:AYI).

David Blood
David Blood

David Blood of Generation Investment Management

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

At Q3's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in AYI a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Acuity Brands, Inc. (NYSE:AYI) was held by Generation Investment Management, which reported holding $180.5 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $98.4 million position. Other investors bullish on the company included Miller Value Partners, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Acuity Brands, Inc. (NYSE:AYI), around 4.45% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, setting aside 1.94 percent of its 13F equity portfolio to AYI.

Due to the fact that Acuity Brands, Inc. (NYSE:AYI) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their full holdings in the third quarter. Intriguingly, Gregg Moskowitz's Interval Partners dropped the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $52.9 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund said goodbye to about $25.4 million worth. These moves are interesting, as total hedge fund interest dropped by 7 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to Acuity Brands, Inc. (NYSE:AYI). We will take a look at Freshpet Inc (NASDAQ:FRPT), BOK Financial Corporation (NASDAQ:BOKF), CACI International Inc (NYSE:CACI), InVitae Corporation (NYSE:NVTA), Grupo Televisa SAB (NYSE:TV), Switch, Inc. (NYSE:SWCH), and Denali Therapeutics Inc. (NASDAQ:DNLI). This group of stocks' market caps resemble AYI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRPT,24,348415,-4 BOKF,15,376008,2 CACI,20,394960,-6 NVTA,24,1807422,-7 TV,16,843545,-1 SWCH,17,229494,1 DNLI,23,179874,1 Average,19.9,597103,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $597 million. That figure was $477 million in AYI's case. Freshpet Inc (NASDAQ:FRPT) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 15 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 68.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 31.1% in 2021 through December 9th but still managed to beat the market by 5.1 percentage points. Hedge funds were also right about betting on AYI as the stock returned 15% since the end of September (through 12/9) 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.