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Were Hedge Funds Right About Akamai Technologies, Inc. (AKAM)?

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  • AKAM

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Akamai Technologies, Inc. (NASDAQ:AKAM) in this article.

Is Akamai Technologies, Inc. (NASDAQ:AKAM) the right investment to pursue these days? The best stock pickers were buying. The number of bullish hedge fund positions increased by 5 in recent months. Akamai Technologies, Inc. (NASDAQ:AKAM) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. Our calculations also showed that AKAM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 25 hedge funds in our database with AKAM holdings at the end of March.

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a peek at the new hedge fund action regarding Akamai Technologies, Inc. (NASDAQ:AKAM).

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

At Q2's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AKAM over the last 24 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Akamai Technologies, Inc. (NASDAQ:AKAM), which was worth $84 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $72.6 million worth of shares. Marshall Wace LLP, AQR Capital Management, and Arrowstreet Capital 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 L2 Asset Management allocated the biggest weight to Akamai Technologies, Inc. (NASDAQ:AKAM), around 1.3% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.68 percent of its 13F equity portfolio to AKAM.

As aggregate interest increased, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in Akamai Technologies, Inc. (NASDAQ:AKAM). Millennium Management had $4.1 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Ray Dalio's Bridgewater Associates, D. E. Shaw's D E Shaw, and Jinghua Yan's TwinBeech Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Akamai Technologies, Inc. (NASDAQ:AKAM) but similarly valued. We will take a look at Ulta Beauty, Inc. (NASDAQ:ULTA), HEICO Corporation (NYSE:HEI), Insulet Corporation (NASDAQ:PODD), Cincinnati Financial Corporation (NASDAQ:CINF), Teleflex Incorporated (NYSE:TFX), Broadridge Financial Solutions, Inc. (NYSE:BR), and M&T Bank Corporation (NYSE:MTB). All of these stocks' market caps match AKAM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ULTA,40,1213090,-6 HEI,41,644494,-4 PODD,38,1447274,-1 CINF,22,780728,0 TFX,30,701718,-3 BR,27,315722,5 MTB,46,539380,10 Average,34.9,806058,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $806 million. That figure was $273 million in AKAM's case. M&T Bank Corporation (NYSE:MTB) is the most popular stock in this table. On the other hand Cincinnati Financial Corporation (NASDAQ:CINF) is the least popular one with only 22 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 overall hedge fund sentiment score for AKAM is 49.2. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately AKAM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AKAM investors were disappointed as the stock returned -8% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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