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Did Hedge Funds Drop The Ball On Acuity Brands, Inc. (AYI) ?

Nina Todic

Is Acuity Brands, Inc. (NYSE:AYI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Acuity Brands, Inc. (NYSE:AYI) was in 29 hedge funds' portfolios at the end of the first quarter of 2019. AYI shareholders have witnessed an increase in support from the world's most elite money managers of late. There were 27 hedge funds in our database with AYI positions at the end of the previous quarter. Our calculations also showed that ayi isn't among the 30 most popular stocks among hedge funds.

If you'd ask most traders, hedge funds are perceived as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the aristocrats of this club, around 750 funds. These money managers oversee the lion's share of all hedge funds' total capital, and by paying attention to their inimitable stock picks, Insider Monkey has discovered a few investment strategies that have historically outpaced the market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

David Blood

Let's view the recent hedge fund action regarding Acuity Brands, Inc. (NYSE:AYI).

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

At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% 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. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AYI Positions

The largest stake in Acuity Brands, Inc. (NYSE:AYI) was held by Generation Investment Management, which reported holding $406.4 million worth of stock at the end of March. It was followed by International Value Advisers with a $192.9 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and D E Shaw.

As industrywide interest jumped, specific money managers have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, established the largest position in Acuity Brands, Inc. (NYSE:AYI). Moore Global Investments had $5 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $3.9 million position during the quarter. The following funds were also among the new AYI investors: Alexander Roepers's Atlantic Investment Management, Martin D. Sass's MD Sass, and D. E. Shaw's D E Shaw.

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. We will take a look at The Stars Group Inc. (NASDAQ:TSG), InterXion Holding NV (NYSE:INXN), argenx SE (NASDAQ:ARGX), and Integra Lifesciences Holdings Corp (NASDAQ:IART). This group of stocks' market valuations match AYI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSG,44,902595,4 INXN,25,741670,-3 ARGX,24,750610,-3 IART,19,159928,1 Average,28,638701,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $639 million. That figure was $796 million in AYI's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Integra Lifesciences Holdings Corp (NASDAQ:IART) is the least popular one with only 19 bullish hedge fund positions. Acuity Brands, Inc. (NYSE:AYI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on AYI as the stock returned 11% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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