Nasdaq to diminish Apple's share of index in rebalance

Posted:
in AAPL Investors edited January 2014
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.
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Comments

  • Reply 1 of 53
    big kcbig kc Posts: 106member
    Everyone's selling?? BUY-BUY-BUY!!!!



  • Reply 2 of 53
    okboyokboy Posts: 10member
    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!
  • Reply 3 of 53
    mactelmactel Posts: 1,275member
    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.
  • Reply 4 of 53
    joshdeanjoshdean Posts: 24member
    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?
  • Reply 5 of 53
    haruhikoharuhiko Posts: 46member
    If you can't win the game, change the rule,





    AAPL could take a hit, and it's time to buy in!
  • Reply 6 of 53
    echosonicechosonic Posts: 447member
    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.
  • Reply 7 of 53
    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?
  • Reply 8 of 53
    jon tjon t Posts: 131member
    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?
  • Reply 9 of 53
    irnchrizirnchriz Posts: 1,571member
    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?
  • Reply 10 of 53
    joshdeanjoshdean Posts: 24member
    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.
  • Reply 11 of 53
    brisancebrisance Posts: 51member
    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.
  • Reply 12 of 53
    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.
  • Reply 13 of 53
    mdriftmeyermdriftmeyer Posts: 7,185member
    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.
  • Reply 14 of 53
    sidstesidste Posts: 25member
    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.
  • Reply 15 of 53
    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.
  • Reply 16 of 53
    jasenj1jasenj1 Posts: 908member
    Google is showing AAPL down $10 premarket. Does seem like a good opportunity to acquire some shares.



    - Jasen.
  • Reply 17 of 53
    blastdoorblastdoor Posts: 1,888member
    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.
  • Reply 18 of 53
    MacProMacPro Posts: 17,835member
    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.
  • Reply 19 of 53
    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.
  • Reply 20 of 53
    anantksundaramanantksundaram Posts: 18,823member
    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.
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