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Elliott Associates Is Dumping Akamai Technologies Inc (AKAM), Now What?

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Akamai Technologies, Inc. (NASDAQ:AKAM).

Hedge fund interest in Akamai Technologies, Inc. (NASDAQ:AKAM) shares was flat at the end of second quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ball Corporation (NYSE:BLL), Cna Financial Corp (NYSE:CNA), and Vistra Energy Corp. (NYSE:VST) to gather more data points. One thing we know about Akamai is that activist hedge fund Elliott disclosed selling a third of its AKAM position on Friday.

Paul Singer ELLIOTT MANAGEMENT

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 flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Let’s view the fresh hedge fund action regarding Akamai Technologies, Inc. (NASDAQ:AKAM).

What does the smart money think about Akamai Technologies, Inc. (NASDAQ:AKAM)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018 (see the list of 25 most popular stocks among hedge funds). By comparison, 27 hedge funds held shares or bullish call options in AKAM heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in Akamai Technologies, Inc. (NASDAQ:AKAM), worth close to $311.2 million, accounting for 0.3% of its total 13F portfolio. On AQR Capital Management’s heels is Elliott Management, managed by Paul Singer, which holds a $146.5 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Michael Doheny’s Freshford Capital Management, Will Graves’s Boardman Bay Capital Management and Kenneth Squire’s 13D Management.

Because Akamai Technologies, Inc. (NASDAQ:AKAM) has experienced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of funds who were dropping their full holdings last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group said goodbye to the largest investment of the 700 funds watched by Insider Monkey, valued at an estimated $114.1 million in stock. Howard Marks’s fund, Oaktree Capital Management, also dumped its stock, about $56 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Akamai Technologies, Inc. (NASDAQ:AKAM) but similarly valued. These stocks are Ball Corporation (NYSE:BLL), Cna Financial Corp (NYSE:CNA), Vistra Energy Corp. (NYSE:VST), and SS and C Technologies Holdings Inc (NASDAQ:SSNC). This group of stocks’ market caps are closest to AKAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLL 20 357460 -7
CNA 15 79770 1
VST 43 3687183 8
SSNC 35 1504166 5

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $1407 million. That figure was $911 million in AKAM’s case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand Cna Financial Corp (NYSE:CNA) is the least popular one with only 15 bullish hedge fund positions. Akamai Technologies, Inc. (NASDAQ:AKAM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard VST might be a better candidate to consider a long position.

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

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