Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Akamai Technologies, Inc. (NASDAQ:AKAM) and see how the stock is affected by the recent hedge fund activity.
Is Akamai Technologies, Inc. (NASDAQ:AKAM) a cheap stock to buy now? Money managers are turning bullish. The number of long hedge fund positions went up by 5 lately. Our calculations also showed that AKAM isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action surrounding Akamai Technologies, Inc. (NASDAQ:AKAM).
Hedge fund activity in Akamai Technologies, Inc. (NASDAQ:AKAM)
Heading into the third quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AKAM over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Akamai Technologies, Inc. (NASDAQ:AKAM), which was worth $402.2 million at the end of the second quarter. On the second spot was GLG Partners which amassed $65.2 million worth of shares. Moreover, Alyeska Investment Group, Renaissance Technologies, and D E Shaw were also bullish on Akamai Technologies, Inc. (NASDAQ:AKAM), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key hedge funds were breaking ground themselves. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, initiated the biggest position in Akamai Technologies, Inc. (NASDAQ:AKAM). Polar Capital had $9.1 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe's Voleon Capital also made a $4.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Ravee Mehta's Nishkama Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Akamai Technologies, Inc. (NASDAQ:AKAM) but similarly valued. These stocks are Annaly Capital Management, Inc. (NYSE:NLY), Hasbro, Inc. (NASDAQ:HAS), Chewy, Inc. (NYSE:CHWY), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO). This group of stocks' market valuations are closest to AKAM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NLY,21,224083,0 HAS,24,383765,6 CHWY,38,621104,38 TTWO,60,1521405,10 Average,35.75,687589,13.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $688 million. That figure was $841 million in AKAM's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 21 bullish hedge fund positions. Akamai Technologies, Inc. (NASDAQ:AKAM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AKAM as the stock returned 14% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.