Is LLNW A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Limelight Networks, Inc. (NASDAQ:LLNW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is LLNW a good stock to buy now? Prominent investors were becoming less hopeful. The number of bullish hedge fund positions dropped by 7 in recent months. Limelight Networks, Inc. (NASDAQ:LLNW) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that LLNW 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).

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s take a look at the new hedge fund action regarding Limelight Networks, Inc. (NASDAQ:LLNW).

Do Hedge Funds Think LLNW Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LLNW over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Limelight Networks, Inc. (NASDAQ:LLNW) was held by Driehaus Capital, which reported holding $21 million worth of stock at the end of September. It was followed by Millennium Management with a $15.7 million position. Other investors bullish on the company included Royce & Associates, Two Sigma Advisors, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Limelight Networks, Inc. (NASDAQ:LLNW), around 1.87% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to LLNW.

Due to the fact that Limelight Networks, Inc. (NASDAQ:LLNW) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies that elected to cut their full holdings in the third quarter. Intriguingly, Renaissance Technologies cut the biggest stake of the 750 funds tracked by Insider Monkey, totaling close to $2.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $2.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Limelight Networks, Inc. (NASDAQ:LLNW). We will take a look at Hudson Ltd. (NYSE:HUD), Nexa Resources S.A. (NYSE:NEXA), Cryolife Inc (NYSE:CRY), Matthews International Corp (NASDAQ:MATW), NV5 Global Inc (NASDAQ:NVEE), S & T Bancorp Inc (NASDAQ:STBA), and Codexis, Inc. (NASDAQ:CDXS). 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
HUD 16 83748 -5
NEXA 2 2468 -2
CRY 12 57875 1
MATW 18 66097 0
NVEE 9 16322 2
STBA 5 3722 -1
CDXS 13 149244 0
Average 10.7 54211 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $74 million in LLNW’s case. Matthews International Corp (NASDAQ:MATW) 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 2 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. Our overall hedge fund sentiment score for LLNW is 66.1. 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 LLNW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LLNW were disappointed as the stock returned -30.2% 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.

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