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Did Hedge Funds Make The Right Call On Limelight Networks, Inc. (LLNW) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Limelight Networks, Inc. (NASDAQ:LLNW) and determine whether the smart money was really smart about this stock.

Is Limelight Networks, Inc. (NASDAQ:LLNW) a healthy stock for your portfolio? Prominent investors were betting on the stock. The number of long hedge fund bets inched up by 3 in recent months. Our calculations also showed that LLNW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). LLNW was in 19 hedge funds’ portfolios at the end of March. There were 16 hedge funds in our database with LLNW holdings at the end of the previous quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Carlo Cannell

J. Carlo Cannell of Cannell Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to go over the latest hedge fund action encompassing Limelight Networks, Inc. (NASDAQ:LLNW).

Hedge fund activity in Limelight Networks, Inc. (NASDAQ:LLNW)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LLNW over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

The largest stake in Limelight Networks, Inc. (NASDAQ:LLNW) was held by Driehaus Capital, which reported holding $20.9 million worth of stock at the end of September. It was followed by Cannell Capital with a $16.1 million position. Other investors bullish on the company included Royce & Associates, Harvey Partners, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Limelight Networks, Inc. (NASDAQ:LLNW), around 10.02% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, setting aside 6.7 percent of its 13F equity portfolio to LLNW.

Consequently, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Limelight Networks, Inc. (NASDAQ:LLNW). Marshall Wace LLP had $2 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider’s SG Capital Management also initiated a $0.6 million position during the quarter. The other funds with brand new LLNW positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Donald Sussman’s Paloma Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Limelight Networks, Inc. (NASDAQ:LLNW). We will take a look at The Buckle, Inc. (NYSE:BKE), Vocera Communications Inc (NYSE:VCRA), American Finance Trust, Inc. (NASDAQ:AFIN), and First Bancorp (NASDAQ:FBNC). This group of stocks’ market valuations match LLNW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKE 15 46702 -6
VCRA 15 99255 2
AFIN 10 13470 2
FBNC 13 42593 -1
Average 13.25 50505 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $87 million in LLNW’s case. The Buckle, Inc. (NYSE:BKE) is the most popular stock in this table. On the other hand American Finance Trust, Inc. (NASDAQ:AFIN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Limelight Networks, Inc. (NASDAQ:LLNW) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately LLNW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LLNW were disappointed as the stock returned 12.3% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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