Nasdaq rebalancing seen as a buying opportunity for Apple investors

Posted:
in AAPL Investors edited January 2014
Apple will be negatively impacted by the decision to re-weight its stock on the Nasdaq-100 Index, but the company's fundamentals remain strong, presenting a buying opportunity for investors.



Analyst Brian White with Ticonderoga Securities said the announcement on Tuesday that the Nasdaq would rebalance AAPL stock from 20 percent to 12 percent of its index of the 100 largest nonfinancial stocks is just the latest in a series of headwinds for Apple's market performance. The rebalancing, he said, adds "more noise to a loud past few months."



"Despite strong demand for Apple's products and a very successful launch of the iPad 2, the stock has been battling headwinds such as today's rebalancing announcement, along with concerns regarding Japan, Steve Jobs' health, concerns regarding a delayed iPad 2 launch (this was proven false), the timing of the upcoming iPhone 5 launch and general market noise," White said.



He believes these concerns will eventually subside, allowing investors to again focus on the company's fundamentals. White believes the company's stock will reach new all-time highs as the year progresses, as products like the iPhone, iPad and Mac lineup continue to experience year over year growth.



Specifically, he believes that continued strong demand for the iPad 2 epitomizes Apple's current success. Demand for Apple products is predicted to be a "phenomenon" that will continue to bring earnings surprises over the next 12 to 18 months.



"We also believe the buzz surrounding the iPad 2 launch is also driving a further halo effect around Apple's existing portfolio as consumers are drawn into stores," he said.



Ticonderoga Securities has a 12-month price target of $550 for AAPL stock, and a recommended buy rating for investors.
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Comments

  • Reply 1 of 26
    anantksundaramanantksundaram Posts: 20,373member
    If your horizon is at least a few years -- as it should be -- events like this are all noise around a longer-term trend.
  • Reply 2 of 26
    will2will2 Posts: 4member
    Good thing I bought back when it was $15 per share. Gotta love Steve for that.
  • Reply 3 of 26
    malaxmalax Posts: 1,598member
    This is important information. Basically it means that AAPL's great stock price appreciation over the past few years caused it to assume a huge share of the S&P100. Obviously having 1 stock account for 20% of an index of 100 companies is a bit unbalanced. So they're reweighting it down to 12%. In practice, what this means is that the large number of index mutual funds that mirror the composition of the S&P100 will sell off nearly half their AAPL shares. That'll be a BIG sell-off and negatively affect the price of AAPL shares (in fact that might be what caused the big drop yesterday?). But as the analyst states, this is predictable and in no way statement of the market's displeasure with Apple, Inc.



    Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.
  • Reply 4 of 26
    eh270eh270 Posts: 60member
    No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..
  • Reply 5 of 26
    will2will2 Posts: 4member
    Quote:
    Originally Posted by malax View Post


    Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.



    Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.
  • Reply 6 of 26
    Quote:
    Originally Posted by malax View Post


    This is important information. Basically it means that AAPL's great stock price appreciation over the past few years caused it to assume a huge share of the S&P100. Obviously having 1 stock account for 20% of an index of 100 companies is a bit unbalanced. So they're reweighting it down to 12%. In practice, what this means is that the large number of index mutual funds that mirror the composition of the S&P100 will sell off nearly half their AAPL shares. That'll be a BIG sell-off and negatively affect the price of AAPL shares (in fact that might be what caused the big drop yesterday?). But as the analyst states, this is predictable and in no way statement of the market's displeasure with Apple, Inc.



    Frankly I wonder when the Dow Jones Industrial Average will be updated to add AAPL. When (if) that happens, the opposite will happen: funds will mechanically buy up AAPL shares driving up the price.



    Anyone know when this sell off will kick in -- so far after opening around 336 the stock's hovering at 340.



    Will managers sell off immediately or over the course of the month?
  • Reply 7 of 26
    scottibscottib Posts: 381member
    Quote:
    Originally Posted by will2 View Post


    Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.



    The Dow Industrial Average is not a part of NYSE. It has both NYSE- and NASDAQ-listed companies.



    http://en.wikipedia.org/wiki/Dow_Jon...age#Components
  • Reply 8 of 26
    Quote:
    Originally Posted by eh270 View Post


    No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..



    AI is a blog. Get over it.
  • Reply 9 of 26
    aaarrrggghaaarrrgggh Posts: 1,608member
    Quote:
    Originally Posted by JakeBarnes View Post


    Anyone know when this sell off will kick in -- so far after opening around 336 the stock's hovering at 340.



    Will managers sell off immediately or over the course of the month?



    A managed fund would sell opportunistically, but a pure index fund would sell immediately. (Of course, they would likely sell to themselves if it presented a buying opportunity for another fund, so not all shares would be traded on the open market.



    Institutional ownership is 66%, which is pretty flat over the last 5 years, despite the weighting on the NASDAQ. I doubt this will be a big hit; nothing compared to the impact of going in or out of the S&P 500.
  • Reply 10 of 26
    Quote:
    Originally Posted by will2 View Post


    Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.



    And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.
  • Reply 11 of 26
    Quote:
    Originally Posted by will2 View Post


    Isn't the Dow an average of 100 top companies on the NYSE? If so AAPL would have to jump boards for that to happen and I think that's unlikely.



    The Dow Jones Industrial Index is 30 stocks, they also have a transportation index and there are other lists. The Industrials Index is the most followed number... The averages are not done to maximize the "top" stocks, but to give a barometer for the broader market, hence listing and delisting of new stocks over the years. GE is the only company on the original list that is still there today (see Dow Wiki).



    Apple (who is only on the NASDAQ) at one point was offered to move to the NYSE and declined. I don't remember all the financial reasons why they declined at the time (I couldn't drum up a source, sorry).
  • Reply 12 of 26
    damn_its_hotdamn_its_hot Posts: 1,197member
    Quote:
    Originally Posted by Steveafb View Post


    And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.



    You don't have to know the f-ing index - or anything else as far as that goes. I bought at $18.50 (the second time) cause I had been kicking myself since 84 for not buying then . I made myself a promise that if it ever got close again I would buy. It slipped lower before it started rising but I held cause I was in long.



    I call BS on you. Sounds like someone that has missed pulling the trigger more than once and is a little jealous of those of us that bought early and been in for the show!
  • Reply 13 of 26
    damn_its_hotdamn_its_hot Posts: 1,197member
    Quote:
    Originally Posted by eh270 View Post


    No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..



    Why? Do you think all journalist own stock in everything they report on? That would would be some wild stuff!
  • Reply 14 of 26
    bosoxbosox Posts: 20member
    aapl has been a great cash cow for me the last 8 years. BUY HOLD sell a little--> buy a little---> book profits.. rinse and repeat.



    If I had bigger cojones I would borrow against my house, grab up a hundred shares, and hold for 12 months. Even a 450 price target would be a sweet harvest. 550? Another mid-life crisis sports car!
  • Reply 15 of 26
    Quote:
    Originally Posted by Damn_Its_Hot View Post


    You don't have to know the f-ing index - or anything else as far as that goes. I bought at $18.50 (the second time) cause I had been kicking myself since 84 for not buying then . I made myself a promise that if it ever got close again I would buy. It slipped lower before it started rising but I held cause I was in long.



    I call BS on you. Sounds like someone that has missed pulling the trigger more than once and is a little jealous of those of us that bought early and been in for the show!



    You want to bet? I have the data to prove I bought even before you $18.5.



    I was pointing out that he was so ignorant that he doesn't know what the Dow Jones is about, makes me wonder how he figured out to buy stocks...
  • Reply 16 of 26
    Well another big hit to AAPL stock today, is it justified? I admit I do not have a deep understanding of what percentage of AAPL shares are influenced by the NASDAQ 100, but as a small investor in AAPL I've made an attempt to see who will be forced to sell AAPL to comply with the Index chage from 20% to 12%. The one sure fund is the Powershares QQQ trust which as of April 4, 2011 owned 14.94 million AAPL shares with a value of 5.28 billion dollars. My understanding is they will need to release 40% of their AAPL shares by May 1 to get to 12% of the indeq. That would be 5.98 million shares out of the total of 921.28 million total AAPL shares. The percenatge that QQQ will need to sell as a percentage of all AAPL shares is a little less then .6% (notice the decimel point) and of course they can parcel that out a little at at a time throughout April. APPL quarterly report will come out April 16th and with another homerun earnings report should have a larger effect on AAPL then the NASDAQ 100 modification. Of course their may be other funds under contract to tract the NASDAQ 100 I just don't know what influence they have, I just know that QQQ is the biggest and most well known. Most mutual funds and investment banks set their own criteria of holdings and are under no obligation to tract the NASDAQ 100.
  • Reply 17 of 26
    jb510jb510 Posts: 129member
    God analyist speak makes me want to vomit. I hope no one actually puts and faith in what Brian White says.



    One thing for people to realize is that ETFs of indexes are managed and arbitraged to mirror the index. They don't actually have to own an exact percentage of shares for everything in the index the just need to match the performance of the index and use optiOns and other financial instruments to achieve that. The really winners in this rebalancing act are the fund mangers that play it right.
  • Reply 18 of 26
    macrulezmacrulez Posts: 2,455member
    deleted
  • Reply 19 of 26
    negafoxnegafox Posts: 480member
    Quote:
    Originally Posted by eh270 View Post


    No disclosure footnote on this story? I'd assume most of the AppleInsider staff own some AAPL ..



    AppleInsider is not a subsidiary of Apple Inc. Professional news organizations provide such footnotes due to conflict of interest because they are reporting on their parent company.
  • Reply 20 of 26
    robin huberrobin huber Posts: 3,758member
    Quote:
    Originally Posted by Steveafb View Post


    And you said you bought AAPL at $15? I call bullshit. You don't even know the dow jones index...how would anyone believe you. Dow jones has 30 components and not all on nyse. Idiot.



    I bought $10,000 worth on Feb. 7, 1997 for $16.50 a share. Sold that block at about $202 a share last year to pay for a major remodel of my house. I have a smaller block that I bought for $60 a share in April 2006. God bless you, Steve.



    P.S. I'm not a rich guy or a market guru, just a regular guy who got lucky. I had faith in Apple when all others were calling it dead.
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