You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Limelight Networks, Inc. (NASDAQ:LLNW) was in 17 hedge funds’ portfolios at the end of September. LLNW shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 18 hedge funds in our database with LLNW positions at the end of the previous quarter. Our calculations also showed that llnw isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Let’s take a glance at the fresh hedge fund action regarding Limelight Networks, Inc. (NASDAQ:LLNW).
What does the smart money think about Limelight Networks, Inc. (NASDAQ:LLNW)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LLNW over the last 13 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.
More specifically, Renaissance Technologies was the largest shareholder of Limelight Networks, Inc. (NASDAQ:LLNW), with a stake worth $13.7 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $6.2 million. Marshall Wace LLP, Two Sigma Advisors, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Limelight Networks, Inc. (NASDAQ:LLNW) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds who sold off their entire stakes heading into Q3. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $4.5 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dropped about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to Limelight Networks, Inc. (NASDAQ:LLNW). These stocks are On Deck Capital Inc (NYSE:ONDK), Access National Corporation (NASDAQ:ANCX), Community Healthcare Trust Inc (NYSE:CHCT), and Putnam Premier Income Trust (NYSE:PPT). This group of stocks’ market valuations are similar to LLNW’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $44 million in LLNW’s case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Putnam Premier Income Trust (NYSE:PPT) is the least popular one with only 1 bullish hedge fund positions. Limelight Networks, Inc. (NASDAQ:LLNW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ONDK might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.