Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Limelight Networks, Inc. (NASDAQ:LLNW), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Limelight Networks, Inc. (NASDAQ:LLNW) a buy right now? The smart money is taking an optimistic view. The number of bullish hedge fund positions moved up by 2 lately. 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 below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to take a gander at the recent hedge fund action surrounding Limelight Networks, Inc. (NASDAQ:LLNW).
What have hedge funds been doing with Limelight Networks, Inc. (NASDAQ:LLNW)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LLNW over the last 17 quarters. So, let’s see 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 Cannell Capital, which reported holding $13 million worth of stock at the end of September. It was followed by Harvey Partners with a $6.7 million position. Other investors bullish on the company included Renaissance Technologies, AQR Capital Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Limelight Networks, Inc. (NASDAQ:LLNW), around 4.84% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, dishing out 4.2 percent of its 13F equity portfolio to LLNW.
Now, specific money managers have jumped into Limelight Networks, Inc. (NASDAQ:LLNW) headfirst. Manatuck Hill Partners, managed by Mark Broach, initiated the most valuable position in Limelight Networks, Inc. (NASDAQ:LLNW). Manatuck Hill Partners had $0.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.2 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Limelight Networks, Inc. (NASDAQ:LLNW) but similarly valued. We will take a look at CymaBay Therapeutics Inc (NASDAQ:CBAY), Adverum Biotechnologies, Inc. (NASDAQ:ADVM), Teekay Tankers Ltd. (NYSE:TNK), and Clearwater Paper Corp (NYSE:CLW). This group of stocks’ market values are closest to LLNW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBAY | 21 | 155764 | -3 |
| ADVM | 11 | 83191 | -4 |
| TNK | 18 | 30256 | 6 |
| CLW | 7 | 20731 | -1 |
| Average | 14.25 | 72486 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $40 million in LLNW’s case. CymaBay Therapeutics Inc (NASDAQ:CBAY) is the most popular stock in this table. On the other hand Clearwater Paper Corp (NYSE:CLW) is the least popular one with only 7 bullish hedge fund positions. Limelight Networks, Inc. (NASDAQ:LLNW) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on LLNW as the stock returned 40.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
