IT services company Akamai Technologies, Inc. (NASDAQ:AKAM)’s Chief Executive Officer Thomson F Leighton bought 25,000 shares of the company last week, at an average price of $45.28 per share. He now owns more than 3 million units of common stock valued at more than $135 million.
The acquisition followed an important announcement made last Monday (Dec. 2nd): the company will acquire Prolexic, “a provider of cloud-based security solutions for protecting data centers and enterprise IP applications from distributed denial of service (DDoS) attacks.” Through this purchase, the web security and optimization provider seeks to expand its portfolio of cloud-based enterprise and data center security solutions.
Nonetheless, the insider has perceived some downside since his purchase. The stock crossed below its 200 day moving average of $44.18, today, Monday. The drop follows Verizon Communications Inc. (NYSE:VZ)’s decision of to acquire EdgeCast, one of Akamai Technologies, Inc. (NASDAQ:AKAM)’s main competitors. Nonetheless, the market seems to have overreacted: Wells Fargo analyst Gray Powell stated, in a note to investors, that the impact of this purchase over Akamai’s overall profitability should be limited, even though Verizon Wireless is an Akamai customer, as it probably does not account for more than 1% of the IT services company´s revenue.
One way or another, Leighton will most likely not care about this slight price fluctuation. In fact, Akamai Technologies, Inc. (NASDAQ:AKAM)’s CEO seems to be betting on the company’s long term results. As global cyber security spending continues to increase, this firm’s wide portfolio should help it seize big opportunities. The company is not only investing in M&A, but also on R&D, and on expanding its sales force, getting ready for a demand bound to rocket.
But Leighton is not the only one placing bets on Akamai. At least 30 of the major hedge funds that we track hold long positions in the company. Amongst them we should highlight Clifton S. Robbins‘ Blue Harbour Group –the biggest institutional bull- that owns more than $165 million in shares, which account for about 12% of its portfolio. Other prominent bulls worth mentioning are Ken Griffin‘s Citadel Investment Group, with $43 million in shares, and Panayotis Takis Sparaggis‘ Alkeon Capital Management, which holds almost $80 million worth of stock.
The stock of Akamai trades at 29 times its earnings, which represents a 40% discount to its industry’s average, while offering wide margins and returns. If insiders and funds are placing big stakes on this IT company with almost $8 billion in market cap, should you too?
Disclosure: Javier Hasse holds no position in any stocks mentioned