Hedge Funds Are Plowing Into Limelight Networks, Inc. (LLNW)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Limelight Networks, Inc. (NASDAQ:LLNW) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Limelight Networks, Inc. (NASDAQ:LLNW) a worthy stock to buy now? Money managers were becoming hopeful. The number of long hedge fund positions moved up by 5 recently. Limelight Networks, Inc. (NASDAQ:LLNW) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LLNW 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).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the key hedge fund action encompassing Limelight Networks, Inc. (NASDAQ:LLNW).

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

At second quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in LLNW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is LLNW A Good Stock To Buy?

Among these funds, Driehaus Capital held the most valuable stake in Limelight Networks, Inc. (NASDAQ:LLNW), which was worth $24.6 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $15.4 million worth of shares. Marshall Wace LLP, Two Sigma Advisors, and Quaker Capital Investments 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 Quaker Capital Investments allocated the biggest weight to Limelight Networks, Inc. (NASDAQ:LLNW), around 3.5% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, dishing out 3.46 percent of its 13F equity portfolio to LLNW.

As aggregate interest increased, some big names were breaking ground themselves. Quaker Capital Investments, managed by Mark G. Schoeppner, established the biggest position in Limelight Networks, Inc. (NASDAQ:LLNW). Quaker Capital Investments had $7.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $2 million position during the quarter. The other funds with brand new LLNW positions are Mario Gabelli’s GAMCO Investors, Dmitry Balyasny’s Balyasny Asset Management, and Bruce Kovner’s Caxton Associates LP.

Let’s now review hedge fund activity in other stocks similar to Limelight Networks, Inc. (NASDAQ:LLNW). We will take a look at GreenSky, Inc. (NASDAQ:GSKY), PAE Incorporated (NASDAQ:PAE), Upland Software Inc (NASDAQ:UPLD), Vapotherm, Inc. (NYSE:VAPO), Nexa Resources S.A. (NYSE:NEXA), Griffon Corporation (NYSE:GFF), and Heska Corp (NASDAQ:HSKA). All of these stocks’ market caps match LLNW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GSKY 13 23118 4
PAE 17 145174 -4
UPLD 16 178656 -1
VAPO 18 257570 6
NEXA 4 3545 0
GFF 9 98383 -4
HSKA 14 170234 -1
Average 13 125240 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $97 million in LLNW’s case. Vapotherm, Inc. (NYSE:VAPO) is the most popular stock in this table. On the other hand Nexa Resources S.A. (NYSE:NEXA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Limelight Networks, Inc. (NASDAQ:LLNW) is more popular among hedge funds. Our overall hedge fund sentiment score for LLNW is 90. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 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 -21.5% 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.