While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Akamai Technologies, Inc. (NASDAQ:AKAM).
Is AKAM a good stock to buy now? 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 September. Our calculations also showed that AKAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 The Cooper Companies, Inc. (NYSE:COO), Vulcan Materials Company (NYSE:VMC), and Palantir Technologies Inc. (NYSE:PLTR) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s take a peek at the key hedge fund action surrounding Akamai Technologies, Inc. (NASDAQ:AKAM).
Do Hedge Funds Think AKAM Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AKAM over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Akamai Technologies, Inc. (NASDAQ:AKAM), with a stake worth $131.1 million reported as of the end of September. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $51.9 million. Polar Capital, Millennium Management, and GLG Partners 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 Provenire Capital allocated the biggest weight to Akamai Technologies, Inc. (NASDAQ:AKAM), around 3.98% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, earmarking 2.76 percent of its 13F equity portfolio to AKAM.
Since Akamai Technologies, Inc. (NASDAQ:AKAM) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers that slashed their entire stakes by the end of the third quarter. Intriguingly, D. E. Shaw’s D E Shaw said goodbye to the largest position of the 750 funds tracked by Insider Monkey, comprising about $33.3 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also said goodbye to its stock, about $32.5 million worth. These transactions are interesting, 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 similar to Akamai Technologies, Inc. (NASDAQ:AKAM). We will take a look at The Cooper Companies, Inc. (NYSE:COO), Vulcan Materials Company (NYSE:VMC), Palantir Technologies Inc. (NYSE:PLTR), Rollins, Inc. (NYSE:ROL), Discover Financial Services (NYSE:DFS), Valero Energy Corporation (NYSE:VLO), and Coca-Cola European Partners plc (NYSE:CCEP). This group of stocks’ market valuations are closest to AKAM’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 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $813 million. That figure was $441 million in AKAM’s case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand Coca-Cola European Partners plc (NYSE:CCEP) is the least popular one with only 23 bullish hedge fund positions. Akamai Technologies, Inc. (NASDAQ:AKAM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AKAM is 70.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately AKAM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AKAM were disappointed as the stock returned -6.6% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.