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Do Hedge Funds Love Akamai Technologies, Inc. (AKAM)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Akamai Technologies, Inc. (NASDAQ:AKAM), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Akamai Technologies, Inc. (NASDAQ:AKAM) ready to rally soon? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets improved by 1 in recent months. Our calculations also showed that AKAM isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

AQR CAPITAL MANAGEMENT

We’re going to review the new hedge fund action regarding Akamai Technologies, Inc. (NASDAQ:AKAM).

What have hedge funds been doing with Akamai Technologies, Inc. (NASDAQ:AKAM)?

Heading into the fourth quarter of 2018, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2018. By comparison, 24 hedge funds held shares or bullish call options in AKAM heading into this year. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

AKAM_dec2018

The largest stake in Akamai Technologies, Inc. (NASDAQ:AKAM) was held by AQR Capital Management, which reported holding $311.2 million worth of stock at the end of September. It was followed by Elliott Management with a $146.3 million position. Other investors bullish on the company included Kensico Capital, Freshford Capital Management, and Millennium Management.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Akamai Technologies, Inc. (NASDAQ:AKAM) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized call position in Akamai Technologies, Inc. (NASDAQ:AKAM). Balyasny Asset Management had $13.8 million invested in the company at the end of the quarter. Nick Niell’s Arrowgrass Capital Partners also made a $9.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Akamai Technologies, Inc. (NASDAQ:AKAM). These stocks are Cna Financial Corporation (NYSE:CNA), HCP, Inc. (NYSE:HCP), Jack Henry & Associates, Inc. (NASDAQ:JKHY), and Domino’s Pizza, Inc. (NYSE:DPZ). This group of stocks’ market valuations match AKAM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNA 15 80361 0
HCP 25 373733 5
JKHY 14 272248 2
DPZ 28 2296221 2
Average 20.5 755641 2.25

View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $755.64 billion. That figure was $785 million in AKAM’s case. Domino’s Pizza, Inc. (NYSE:DPZ) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Akamai Technologies, Inc. (NASDAQ:AKAM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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