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Nasdaq to diminish Apple's share of index in rebalance

post #1 of 54
Thread Starter 
Apple stock could see heavy trading on Tuesday after the Nasdaq stock exchange announces its plan to reduce Apple's portion of the Nasdaq-100 index from 20 percent to 12 percent during an adjustment that will increase the weighting of rivals Google and Microsoft.

The Nasdaq-100 index, which contains the 100 largest nonfinancial stocks that trade on the Nasdaq, will adjust Apple's weighting from a boosted 20.5 percent to a projected 12.3 percent, a more standard ratio based on the number of Apple shares, The Wall Street Journal reports. Nasdaq is set to announce the changes Tuesday, though they won't take effect until May 2.

According to the report, the upcoming changes to the index may cause some short-term instability in the stock market as managers adjust their holdings.

As such, shares of Apple's stock could tumble if financial products that track the Nasdaq-100, which Nasdaq says number 2,900 in 27 countries, decide to reduce their investment in Apple.

"Nasdaq estimates that for every $1 billion directly tracking the index, such as through mutual funds or ETFs, 9.5 million shares will change hands," the report noted.

"It's going to be a big trade," said Nasdaq executive vice president John Jacobs. "We wanted to make this very transparent. Everyone will see what we're doing and everyone will have a month before we do this."

Apple isn't the only company affected by the rebalance, though it will remain the largest component of the index. 81 of the companies tracked by the index will see their weighting reduce, while 19 will receive a bigger share of the index.

The companies receiving the biggest boost are Microsoft, Intel, Google and Oracle. Microsoft will jump from a 3.4 percent share of the index to 8.3 percent, while Google will move from a 4.2 percent share to 5.8 percent. Intel's share will grow from 1.6 percent to 4.2 percent and Oracle's portion of the index will more than double from 3.3 percent to 6.7 percent.



Retooling of the Nasdaq-100 is rare, though not unheard of. In 1998, the index underwent an adjustment in order meet IRS rules for exchange-traded funds based on the index. Top stocks, such as Microsoft and Intel, were weighted in order to make the index more diverse. At the time, Apple wasn't in the top third of the index.

Shares of Apple stock are up 5 percent from the beginning of the year and nearly 200 percent over the past two years.

Apple's market capitalization passed $300 billion on the first day of trading this year. The Cupertino, Calif., company had already passed long-time rival Microsoft in terms of market cap last May to become the world's largest tech company.

Last September, Apple overtook PetroChina to become the second-largest company in the world by market value, behind just Exxon-Mobil.
post #2 of 54
Everyone's selling?? BUY-BUY-BUY!!!!

post #3 of 54
I don't know enough about this as I wish I did, but it seems unfair to Apple and it's shareholders. To have a hiccup like this after such a mighty comeback, and all-out takeover of the industry, it seems like a screw-over. But there is worry that Apple is over-inflated. I don't think that's true, because I can't think of another company that has been such a sensation in everything it's done since 1998. But maybe this is just making more room for them to grow back. Like a plant that's hit the ceiling and has been trimmed back. It'll still hit the top before the others have a chance, and hopefully this moves the ceiling a bit higher.

Again, I'm nearly a know nothing on this subject. Ignore my metaphor!
post #4 of 54
I smell a lawsuit brewing.

Can they actually legally do this? To cause a company to lose valuation even if they announce their intentions well in advance does not seem right. I'd imagine the stockholders will be a bit unhappy and looking for payback.
post #5 of 54
Notice how the first posters are non-investors? The rest of us are too nauseated to weigh in. I wonder how long it'll be before Apple returns to its current valuation? One month? Two months?
post #6 of 54
If you can't win the game, change the rule,


AAPL could take a hit, and it's time to buy in!
post #7 of 54
Quote:
Originally Posted by joshdean View Post

Notice how the first posters are non-investors? The rest of us are too nauseated to weigh in. I wonder how long it'll be before Apple returns to its current valuation? One month? Two months?

GOOD QUESTIONS....also, what will the pending earnings report do to these numbers, or how will trading around it be affected...?

Dang. I had a wicked formula worked out for profiting around this report, and sure as shit the NASDAQ adjustment is exactly the monkey wrench I did not need.
post #8 of 54
A while back was there not talk of AAPL moving to the Dow ? I know very little about such things maybe someone with more knowledge can answer : Is this a sign that AAPL has out grown the Nasdaq, can it move and should it move?
post #9 of 54
As I bought back in at 248, I will be seriously miffed if this causes another unjustifiable correction to the price. APPL already trades below the S&P500 average P/E! How can that be? Did it announce zero revenue growth in 2011 or what??

Perhaps now WOULD be the perfect time to implement that 4 for 1 share split. THAT would do the trick perfectly!

Please Mr Oppenheimer?
post #10 of 54
Could be a time to dump your AAPL stock and buy back in after the price drops. Could make a few bucks.

How does the US look upon these dealings? Surely this is stock manipulation? They are going to cause a drop in value just like the analysts try to do with their normal FUD. Except this one is legal?
post #11 of 54
Quote:
Originally Posted by irnchriz View Post

Could be a time to dump your AAPL stock and buy back in after the price drops. Could make a few bucks.

How does the US look upon these dealings? Surely this is stock manipulation? They are going to cause a drop in value just like the analysts try to do with their normal FUD. Except this one is legal?

I think you'll find that the bulk of the price drop will occur this morning within a couple of seconds of the opening bell, so you'll be selling at or near the bottom.
post #12 of 54
Pretty obvious market manipulation. AAPL's next earnings call is on April 18 so they need the price low in order to realize capital gains for what seems to be a very strong quarter.
post #13 of 54
Quote:
Originally Posted by irnchriz View Post

Could be a time to dump your AAPL stock and buy back in after the price drops. Could make a few bucks.

How does the US look upon these dealings? Surely this is stock manipulation? They are going to cause a drop in value just like the analysts try to do with their normal FUD. Except this one is legal?

Shhh. Don't let anyone know.
post #14 of 54
Jesus H. Christ this has nothing to do with with devaluing Apple but everything to do with the NASDAQ 100 being less dependent upon Apple's stock and spread the difference across other stocks by intentionally requiring mutual funds investing in the NASDAQ 100 to have a small part of their fund in Apple and a greater portion across other blue chip stocks.

In short, if you want to hold more of APPL you don't buy the fund but Apple directly.
post #15 of 54
Quote:
Originally Posted by irnchriz View Post

Could be a time to dump your AAPL stock and buy back in after the price drops. Could make a few bucks.

How does the US look upon these dealings? Surely this is stock manipulation? They are going to cause a drop in value just like the analysts try to do with their normal FUD. Except this one is legal?

I don't believe it is illegal to sell a stock, especially when you give 30 days heads-up.
post #16 of 54
Quote:
Originally Posted by sidste View Post

I don't believe it is illegal to sell a stock, especially when you give 30 days heads-up.


It's totally fine to sell off any stock held when the trading day opens; as this is not insider information and it's all above the table.
post #17 of 54
Google is showing AAPL down $10 premarket. Does seem like a good opportunity to acquire some shares.

- Jasen.
post #18 of 54
You can dial back the histrionics, folks. This is done all the time. It's how indexes work. If they didn't rebalance stock indexes, the Dow Jones Industrials would still have companies like RCA and Amalgamated Spats.

If you're an investor then this doesn't really affect you other than to maybe create a buying opportunity. If you're a trader who thinks that he/she can play this, you're probably kidding yourself. There are very big players in the market who are well positioned to exploit these trading opportunities to the maximum extent possible. If you're a trader and make money on something like this it's because you got lucky, not because you're smart.
post #19 of 54
Quote:
Originally Posted by mdriftmeyer View Post

Jesus H. Christ this has nothing to do with with devaluing Apple but everything to do with the NASDAQ 100 being less dependent upon Apple's stock and spread the difference across other stocks by intentionally requiring mutual funds investing in the NASDAQ 100 to have a small part of their fund in Apple and a greater portion across other blue chip stocks.

In short, if you want to hold more of APPL you don't buy the fund but Apple directly.

Exactly. It is nothing what so ever to do with AAPL valuation. The fact AAPL will go down just shows how totally clueless those that are selling it to cause the fall are. Unbelievable! The upside is, it gives a buy opportunity for those who understand.
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Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
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Use duckduckgo.com with Safari, not Google Search
Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
Reply
post #20 of 54
Quote:
Originally Posted by digitalclips View Post

Exactly. It is nothing what so ever to do with AAPL valuation. The fact AAPL will go down just shows how totally clueless those that are selling it to cause the fall are. Unbelievable! The upside is, it gives a buy opportunity for those who understand.

The driver in sales will be tracking funds which maintain a share balance to mirror the NASDAQ 100 index. These is not clueless people. Of course, there are the people who will panic sell individual shares but I have no sympathy for them.

If you don't like the game buy something like QQQ which is a major exchange traded fund (ETF) which tracks the NASDAQ 100. I gave up on individual shares years ago and only buy into these types of tracking funds now. Much safer to bet on the market than any one company.
post #21 of 54
This will likely have a negative impact on AAPL, unfortunately, from all the sheep rebalancing their portfolios.

But my guess is it will be short term. Will hopefully go away in a couple of days.
post #22 of 54
Quote:
Originally Posted by MacTel View Post

I smell a lawsuit brewing.

Can they actually legally do this? To cause a company to lose valuation even if they announce their intentions well in advance does not seem right. I'd imagine the stockholders will be a bit unhappy and looking for payback.

There's nothing to sue over here.
post #23 of 54
With an enterprise PE of 11 and sales growth around 50+%, it hard matters what the Naz is doing. Would you sell the business just because of the Naz changed the ratios? Don't see SJ panicking and selling his shares!

Anyway, the main issues now are the iPhone and iPad sales. Can Apple maintain the iPhone sales momentum? A lot Android phones are popping around and people are using it. The iPhone5 needs to come out soon with some new features. Besides the battery life and camera improvements, I do not see what else they can improve? GPS improvements? Those would just be marginal improvements.

The big opportunity would be the iPad2. Supply chain issues? Demand? Profit margins?
post #24 of 54
Quote:
Originally Posted by StuffOfInterest View Post

The driver in sales will be tracking funds which maintain a share balance to mirror the NASDAQ 100 index. These is not clueless people. Of course, there are the people who will panic sell individual shares but I have no sympathy for them.

If you don't like the game buy something like QQQ which is a major exchange traded fund (ETF) which tracks the NASDAQ 100. I gave up on individual shares years ago and only buy into these types of tracking funds now. Much safer to bet on the market than any one company.

The anticipated drop in AAPL today is nothing to do with Apple's valuation. It is a reaction to a perceived change that is not being understood as well as tracking funds as you say. I am perfectly happy buying AAPL thank you, in fact I will probably buy a 100 more soon if this change in the NASDAQ basket distribution results in selling through misunderstanding and a short term dip.
Use duckduckgo.com with Safari, not Google Search
Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
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Use duckduckgo.com with Safari, not Google Search
Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
Reply
post #25 of 54
This is a far cry from the days when the company was "beleaguered."

I bought my first AAPL shares when they were rated as an "Avoid." Now the NASDAQ says they are too successful.
post #26 of 54
How could AAPL have such a huge weight in the NASDAQ in the first place?
post #27 of 54
Ummm.....the only people who will be selling AAPL because of this are those who are REQUIRED to sell AAPL because they are indexed against the NASDAQ100.

This is a great buying opportunity for others.
post #28 of 54
Quote:
Originally Posted by astra4 View Post

How could AAPL have such a huge weight in the NASDAQ in the first place?

Because its value has skyrocketed in the last several years in a way NASDAQ didn't see coming.

If the AAPL stock was worth 10% of the NASDAQ, and it doubled in value while others' went down, you've easily got AAPL at over 20%. See?

These index funds essentially have one share of AAPL, one share of MSFT, etc. So when the value of the individual stocks go up and down, so does the index. But AAPL's done so well lately that its contribution to the NASDAQ index is out of whack. Note that bad stocks get taken off too if they're doing so poorly there's no real contribution any more, like when Citigroup and GM were taken off of the Dow index. What's happening to AAPL is A Good Sign if not A Good Thing for Apple.

So it's actually a really good sign for Apple the company, but because of the way index funds work, it's going to take a hit as all those index funds essentially cash in their winnings. The downside for index fund owners? Their winnings go into Google and MS. ;^)
post #29 of 54
Quote:
Originally Posted by mdriftmeyer View Post

Jesus H. Christ this has nothing to do with with devaluing Apple but everything to do with the NASDAQ 100 being less dependent upon Apple's stock and spread the difference across other stocks by intentionally requiring mutual funds investing in the NASDAQ 100 to have a small part of their fund in Apple and a greater portion across other blue chip stocks.

In short, if you want to hold more of APPL you don't buy the fund but Apple directly.

Thanks it wasn't until I got to your post that I could see any explanation of what this actually meant. The article was a bit useless, and all the first comments about devaluing stock we're obviously a load a crap.
post #30 of 54
Fund managers aren't stupid. They're not going to all dump their shares of AAPL all at once so that they can sell it at a lower price. They got til May 2 to divest their AAPL holdings. They will sell to rebalance slowly as AAPL runs up for earnings. In the mean time they will pick up some cheap shares of AAPL today from those AAPL shareholders who don't know any better.
post #31 of 54
Quote:
Originally Posted by addicted44 View Post

Ummm.....the only people who will be selling AAPL because of this are those who are REQUIRED to sell AAPL because they are indexed against the NASDAQ100.

This is a great buying opportunity for others.


This is true, however, there are couple of things that could happen. keep in mind Fund which are required to hold apple because they are an index fund will hold less making more shares available on the market. Econ 101 teacher you price is a function of supply and demand and if there is more supply prices will drop. The only question will those who buy will they hold and if they do they could reduce supply driving price back up.

The reason Apple's price is high is because the demand is higher than the supply more people want to buy than the amount of share available at any given time.

The part of the reason apple price goes up and down wildly is because of fund manager who from time to time dump shares or buy shares in large amounts to meet there internal goals for their fund.

In the long term I do not think this will affect Apples price but it is going to take time to recover from this since there will be lots of funds looking to sell apple stock and probably not as many willing to jump in.

For those who are wishing for a split, are you nuts, stock splits only devalue a company. It makes each share you own worth less put lots more stock in the market, read the above again to understand.
post #32 of 54
Quote:
Originally Posted by rufwork View Post

If the AAPL stock was worth 10% of the NASDAQ, and it doubled in value while others' went down, you've easily got AAPL at over 20%. See?

[...]

So it's actually a really good sign for Apple the company, but because of the way index funds work, it's going to take a hit as all those index funds essentially cash in their winnings.

The other question is how much of AAPL is held by index funds...

But whatever, the fundamentals remain the same and so I'd expect this hit to be temporary, until the funds have adjusted their positions.

After that, everything returns to normal :-)
post #33 of 54
I wonder if apple will move over the NYSE? or another exchange? I sure would after this.
post #34 of 54
Quote:
Originally Posted by rufwork View Post

Because its value has skyrocketed in the last several years in a way NASDAQ didn't see coming.

If the AAPL stock was worth 10% of the NASDAQ, and it doubled in value while others' went down, you've easily got AAPL at over 20%. See?

These index funds essentially have one share of AAPL, one share of MSFT, etc. So when the value of the individual stocks go up and down, so does the index. But AAPL's done so well lately that its contribution to the NASDAQ index is out of whack. Note that bad stocks get taken off too if they're doing so poorly there's no real contribution any more, like when Citigroup and GM were taken off of the Dow index. What's happening to AAPL is A Good Sign if not A Good Thing for Apple.

So it's actually a really good sign for Apple the company, but because of the way index funds work, it's going to take a hit as all those index funds essentially cash in their winnings. The downside for index fund owners? Their winnings go into Google and MS. ;^)

Thanks for this clarification. We "stock market know nothings" really appreciate it!

"Be aware of wonder." ~ Robert Fulghum

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"Be aware of wonder." ~ Robert Fulghum

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post #35 of 54
Quote:
Originally Posted by DavidW View Post

Fund managers aren't stupid. They're not going to all dump their shares of AAPL all at once so that they can sell it at a lower price. They got til May 2 to divest their AAPL holdings. They will sell to rebalance slowly as AAPL runs up for earnings. In the mean time they will pick up some cheap shares of AAPL today from those AAPL shareholders who don't know any better.

Exactly, that is why you don't need to buy right away. Any strength in AAPL will be seen as an opportunity to sell, so they can balance their portfolio to match the NASDAQ. I suspect that their will be a sell off after every up day until the exchange funds are able to balance their holdings. I would expect the stock to hover around whatever today's closing price is for a couple of weeks. However, I'm not an expert in these things (and I don't think the experts are even that good at predicting the market), so I could be very wrong.
post #36 of 54
Quote:
Originally Posted by addicted44 View Post

Ummm.....the only people who will be selling AAPL because of this are those who are REQUIRED to sell AAPL....

Well and bozos of course that panic at something like this - I do totally agree that this is a great buy opportunity to make some fair gains. Then the starts here please.

Apologies for the weak ref to Jimi's classic Purple Haze.
post #37 of 54
Quote:
Originally Posted by stevetim View Post

I wonder if apple will move over the NYSE? or another exchange? I sure would after this.

How can you move to a place you already are "at" (I guess). Encouraging to know that there actually people that know less than I about financials.

Bought at $18.50 near Steve's Return time - how sweet it is. I just couldn't miss it again after missing in 1984 - still kick myself about that-I was young but I KNEW what was gonna happen and I didn't give a shit - my misspent youth.
post #38 of 54
Quote:
Originally Posted by joshdean View Post

Notice how the first posters are non-investors? The rest of us are too nauseated to weigh in. I wonder how long it'll be before Apple returns to its current valuation? One month? Two months?

I'm actually happy about this. I'm heavily invested in AAPL, but I bought, and have continued to buy, planning to hold onto it for at least several more years.

This means that the shares I bought yesterday will lose in the short term, but that doesn't really matter to me.

I'm going to keep a very close eye on it's value, and plan to buy another 25 or 50 shares if it drops down to the $320 range.

I still think AAPL will hit $450 by the end of the year.
post #39 of 54
Quote:
Originally Posted by Mynameisjoe View Post

However, I'm not an expert in these things (and I don't think the experts are even that good at predicting the market), so I could be very wrong.

The best advice I ever got was from Sir Paul McCartney's future father-in-law when asked he told him to buy what he knew so he bought the catalog. Damn good advice.

Of course the best rule is always buy low, sell high.

Edit: I did not intend to make it sound like the advice was first hand. I read it in an article Many, many, many moons ago.
post #40 of 54
Quote:
Originally Posted by Damn_Its_Hot View Post

How can you move to a place you already are "at" (I guess). Encouraging to know that there actually people that know less than I about financials.

Bought at $18.50 near Steve's Return time - how sweet it is. I just couldn't miss it again after missing in 1984 - still kick myself about that-I was young but I KNEW what was gonna happen and I didn't give a shit - my mis-spent youth.

It is not common for companies to move to to other exchanges, but it happens more than you think. Some companies feel one or other exchange will get them a better return.

$18.50 was a good buy
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