Is AKAM Stock A Buy or Sell?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Akamai Technologies, Inc. (NASDAQ:AKAM).

Is AKAM stock a buy? Akamai Technologies, Inc. (NASDAQ:AKAM) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Akamai Technologies, Inc. (NASDAQ:AKAM) was in 33 hedge funds’ portfolios at the end of December. 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 Q4 rankings).

In the financial world there are several formulas investors employ to size up publicly traded companies. A pair of the most useful formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform the market by a superb amount (see the details here).

Noam Gottesman of GLG Partners

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 we’re going to review the key hedge fund action regarding Akamai Technologies, Inc. (NASDAQ:AKAM).

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

At fourth quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AKAM over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of Akamai Technologies, Inc. (NASDAQ:AKAM), with a stake worth $66.6 million reported as of the end of December. Trailing AQR Capital Management was Aequim Alternative Investments, which amassed a stake valued at $28.3 million. Citadel Investment Group, Arrowstreet Capital, 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 Fairpointe Capital allocated the biggest weight to Akamai Technologies, Inc. (NASDAQ:AKAM), around 2.94% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, dishing out 2.08 percent of its 13F equity portfolio to AKAM.

Judging by the fact that Akamai Technologies, Inc. (NASDAQ:AKAM) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of money managers who were dropping their entire stakes in the fourth quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley’s Polar Capital said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, comprising close to $45.8 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Akamai Technologies, Inc. (NASDAQ:AKAM). These stocks are Agnico Eagle Mines Limited (NYSE:AEM), Cheniere Energy Partners LP (NYSE:CQP), ONEOK, Inc. (NYSE:OKE), DISH Network Corp. (NASDAQ:DISH), Insulet Corporation (NASDAQ:PODD), Western Digital Corporation (NASDAQ:WDC), and IAC/InterActiveCorp (NASDAQ:IAC). This group of stocks’ market caps are similar to AKAM’s market cap.

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As you can see these stocks had an average of 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $1067 million. That figure was $280 million in AKAM’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 4 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 45.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately AKAM wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); AKAM investors were disappointed as the stock returned -2.1% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.