How Limelight Networks, Inc. (LLNW) Stacks Up Against Its Peers

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Limelight Networks, Inc. (NASDAQ:LLNW) a great investment now? Hedge funds are definitely getting less bullish. The number of bullish hedge fund positions suffered a reduction of 1 in recent months. LLNW was in 8 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with LLNW positions at the end of the June quarter. At the end of this article we will also compare LLNW to other stocks including MiX Telematics Ltd – ADR (NYSE:MIXT), Charter Financial Corp (NASDAQ:CHFN), and Transenterix Inc (NYSEMKT:TRXC) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with Limelight Networks, Inc. (NASDAQ:LLNW)?

Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish positions in LLNW over the last 5 quarters, which has fallen by 33% during that time. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the most valuable position in Limelight Networks, Inc. (NASDAQ:LLNW). Renaissance Technologies has a $4.3 million position in the stock. On Renaissance Technologies’ heels is Royce & Associates, led by Chuck Royce, holding a $3 million position. Remaining members of the smart money that hold long positions contain Jeffrey Moskowitz’s Harvey Partners, David E. Shaw’s D E Shaw, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors. We should note that Harvey Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.

We view hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Becker Drapkin Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified LLNW as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Limelight Networks, Inc. (NASDAQ:LLNW) but similarly valued. These stocks are MiX Telematics Ltd – ADR (NYSE:MIXT), Charter Financial Corp (NASDAQ:CHFN), Transenterix Inc (NYSEMKT:TRXC), and Uniqure NV (NASDAQ:QURE). This group of stocks’ market caps are closest to LLNW’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $11 million in LLNW’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand MiX Telematics Ltd – ADR (NYSE:MIXT) is the least popular one with only 3 bullish hedge fund positions. Limelight Networks, Inc. (NASDAQ:LLNW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard QURE might be a better candidate to consider taking a long position in.

Disclosure: None