In this article you are going to find out whether hedge funds think Akamai Technologies, Inc. (NASDAQ:AKAM) 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 Akamai Technologies, Inc. (NASDAQ:AKAM) a good stock to buy now? The best stock pickers are betting on the stock. The number of long hedge fund positions increased by 4 in recent months. Our calculations also showed that AKAM isn't among the 30 most popular stocks among hedge funds (click for Q1 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 51 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_69704" align="aligncenter" width="389"] Andrew Sandler of Sandler Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the fresh hedge fund action surrounding Akamai Technologies, Inc. (NASDAQ:AKAM).
How are hedge funds trading Akamai Technologies, Inc. (NASDAQ:AKAM)?
At Q1's end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in AKAM a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Akamai Technologies, Inc. (NASDAQ:AKAM) was held by AQR Capital Management, which reported holding $300.4 million worth of stock at the end of September. It was followed by D E Shaw with a $86.5 million position. Other investors bullish on the company included Citadel Investment Group, Alyeska Investment Group, and Polar Capital. In terms of the portfolio weights assigned to each position SG Capital Management allocated the biggest weight to Akamai Technologies, Inc. (NASDAQ:AKAM), around 3.42% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, dishing out 3.26 percent of its 13F equity portfolio to AKAM.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Akamai Technologies, Inc. (NASDAQ:AKAM) headfirst. Sandler Capital Management, managed by Andrew Sandler, assembled the most outsized position in Akamai Technologies, Inc. (NASDAQ:AKAM). Sandler Capital Management had $23.6 million invested in the company at the end of the quarter. George McCabe's Portolan Capital Management also initiated a $19.7 million position during the quarter. The other funds with brand new AKAM positions are Mark Coe's Intrinsic Edge Capital, Kevin Cottrell and Chris LaSusa's KCL Capital, and Ken Grossman and Glen Schneider's SG Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Akamai Technologies, Inc. (NASDAQ:AKAM) but similarly valued. These stocks are The Cooper Companies, Inc. (NYSE:COO), Best Buy Co., Inc. (NYSE:BBY), Essex Property Trust Inc (NYSE:ESS), and Fiat Chrysler Automobiles NV (NYSE:FCAU). This group of stocks' market valuations are similar to AKAM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COO,25,931667,-3 BBY,37,633714,12 ESS,31,368188,-2 FCAU,25,395391,2 Average,29.5,582240,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $582 million. That figure was $757 million in AKAM's case. Best Buy Co., Inc. (NYSE:BBY) is the most popular stock in this table. On the other hand The Cooper Companies, Inc. (NYSE:COO) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Akamai Technologies, Inc. (NASDAQ:AKAM) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately AKAM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AKAM were disappointed as the stock returned 15.6% during the second quarter (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.