As Apple Inc. (AAPL) closed at 519.33 on Friday evening, another reason to which analysts attribute the software company’s sliding NASDAQ ratings has emerged.
In an in-depth investigative report released the same day by Thompson Reuters, Apple was found to be comprising more than 10 percent of assets in 117 of the 1,119 funds that own its shares. And while these larger than normal stakes have generally benefited mutual funds as the stock outperformed other tech investments, it seems that rapid right-sizing of portfolios may be the trend now that the stock is trading at “just another tech stock” prices—and that wide fund ownership may keep the stock’s value low in the near future.
Adding this reason to the well established cache of already circulating reasons, including tax avoidance and lost confidence that the iPhone 5 can take international markets by storm despite selling record units, may not seem like a breakthrough revelation. Stocks often get hoarded as they reach peak values and get sold when they devalue all the time.
But this recent push for funds to sell the stock doesn’t just mean that brave investors can snap up an opportunity as AAPL hits the market at what may be bargain prices, it also means that since mutual funds have been buying most of the stock in the first place—there may not be enough marginal buyers to drive prices back up in the immediate future now that shares have dipped.
Tim Bradshaw of the Financial Times, however, is claiming a chief reason for the devaluation issue as the “4 percent curse.” He reasons that Apple’s February position at 4 percent of the entire S&P 500 caused its share prices to rise to the great heights witnessed in September and come crashing down to the rates observed today which are 25 percent lower—and are in the range of prior “four-percenters” Micrsoft, General Electric and Sisco. Since such great valuation numbers trigger limits for some fund investors, its likely many decided to sell and enjoy any profit they may have still had to make.
Bradshaw cites this reason among Apple’s changing technological landscape as reasons that a new innovation is needed, and needed fast for the company to recover. Since Samsung and Google are catching up in the smartphone and tablet game and Google is absolutely pummeling Apple in the provision of important related areas such as cloud services and maps—it may stand to reason that web based applications are becoming just as important as hardware in the sale of portable devices.
Apple’s usual tactic when confronted with this issues is to promote and issue another device, another platform—another paradigm shift in the tradition of “Think Big.” But until that next big breakthrough is had, the company may want to consider a harder look at it’s web based offerings before they are available to consumers. The iOS version of Pages, for example, which competes with Google Docs as a lighter word processing option, is actually faring poorer in reviews than the prior OSX version.