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Hedge Funds Are Done Buying Akamai Technologies, Inc. (AKAM)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Akamai Technologies, Inc. (NASDAQ:AKAM) and determine whether hedge funds had an edge regarding this stock.

Akamai Technologies, Inc. (NASDAQ:AKAM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that AKAM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare AKAM to other stocks including Ameren Corporation (NYSE:AEE), Interactive Brokers Group, Inc. (NASDAQ:IBKR), and Coca-Cola European Partners plc (NYSE:CCEP) to get a better sense of its popularity.

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

In today’s marketplace there are plenty of formulas investors can use to size up stocks. A duo of the most useful formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a solid amount (see the details here).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding Akamai Technologies, Inc. (NASDAQ:AKAM).

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

At second quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AKAM over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AKAM A Good Stock To Buy?

More specifically, AQR Capital Management was the largest shareholder of Akamai Technologies, Inc. (NASDAQ:AKAM), with a stake worth $227 million reported as of the end of September. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $50.5 million. Polar Capital, GLG Partners, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sandler Capital Management allocated the biggest weight to Akamai Technologies, Inc. (NASDAQ:AKAM), around 2.91% of its 13F portfolio. KCL Capital is also relatively very bullish on the stock, earmarking 2.8 percent of its 13F equity portfolio to AKAM.

Seeing as Akamai Technologies, Inc. (NASDAQ:AKAM) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds who sold off their positions entirely by the end of the second quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest investment of all the hedgies followed by Insider Monkey, totaling an estimated $30.4 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $10.9 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Akamai Technologies, Inc. (NASDAQ:AKAM) but similarly valued. These stocks are Ameren Corporation (NYSE:AEE), Interactive Brokers Group, Inc. (NASDAQ:IBKR), Coca-Cola European Partners plc (NYSE:CCEP), Conagra Brands, Inc. (NYSE:CAG), iQIYI, Inc. (NASDAQ:IQ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), and Cheniere Energy Partners LP (NYSE:CQP). All of these stocks’ market caps match AKAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEE 19 474360 -2
IBKR 32 695740 10
CCEP 27 464657 5
CAG 35 614220 5
IQ 17 1283437 -11
ALNY 38 982898 4
CQP 3 9442 0
Average 24.4 646393 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $646 million. That figure was $549 million in AKAM’s case. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Akamai Technologies, Inc. (NASDAQ:AKAM) is more popular among hedge funds. Our overall hedge fund sentiment score for AKAM is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately AKAM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AKAM were disappointed as the stock returned 8.7% since the end of the second 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.