Institutional ownership of Apple stock reaches new 5-year low
Institutional ownership of large-cap stocks is currently at high levels, but there is one glaring exception to that trend: Apple, which is currently at a five-year low among hedge funds, banks, mutual funds, and other powerful types of financial institutions.
Morgan Stanley has polled ownership data since 2009 and found that the top 30 shareholders of large-cap companies tend to own between 30 and 50 percent of a company's total shares. While some companies, such as Google, Microsoft and Amazon, are currently at near-record highs for institutional ownership in the last five years, Apple is actually at its lowest level since 2009.
Analyst Katy Huberty found that Apple's current top 30 ownership share is at just 30 percent, compared to a 36 percent five-year average, and a peak of 40 percent in 2009. She said this is a sign that institutional investors are currently underweight on Apple as compared to its large-cap peers.
"(Institutional investors) hold less concentrated positions in Apple than in the past with the top 30 holders allocating 2.2% of their fund to AAPL, compared to a high of 4.1% in the last five years and Apple's current 2.9% weighting in the S&P 500," Huberty wrote in a note to investors provided to AppleInsider on Wednesday. "By comparison, institutional funds are overweight (on) all other large cap technology stocks in our analysis."
Morgan Stanley found that the current institutional ownership average among S&P 500 companies is at 83 percent of shares outstanding. It's also increasing at a rate of 80 basis points per year, as individuals increasingly sell their single stocks and buy into mutual funds.
Another company that, like Apple, bucks the trend of higher institutional ownership is electric car maker Tesla. Coincidentally, it was revealed earlier this month that the two companies secretly met to talk about undisclosed matters.
Huberty believes that low institutional ownership of Apple, when compared to other large-cap mobile technology stocks, shows that investors are underestimating the iPhone maker's ability to grow and expand into new markets. For example, she sees growth potential in wearable electronics, as well as new services that Apple could provide with its existing ecosystem of hardware and software.
For example, she believes the launch of a so-called "iWatch" from Apple could generate $17.5 billion from existing iPhone owners in the first year alone. The analyst's projections call for sales of between 32 million and 58 million units in the first 12 months of availability.
Other potential opportunities for Apple cited by Huberty include mobile payments and advertising services. She sees Apple's Touch ID fingerprint sensor and 64-bit A7 processor, along with the company's nearly 600 million App Store accounts and 380 million Bluetooth Low Energy devices on the market, as having laid the groundwork for such services to debut in the future.
Morgan Stanley has maintained its "overweight" rating on AAPL stock with a price target of $630.
Morgan Stanley has polled ownership data since 2009 and found that the top 30 shareholders of large-cap companies tend to own between 30 and 50 percent of a company's total shares. While some companies, such as Google, Microsoft and Amazon, are currently at near-record highs for institutional ownership in the last five years, Apple is actually at its lowest level since 2009.
Analyst Katy Huberty found that Apple's current top 30 ownership share is at just 30 percent, compared to a 36 percent five-year average, and a peak of 40 percent in 2009. She said this is a sign that institutional investors are currently underweight on Apple as compared to its large-cap peers.
"(Institutional investors) hold less concentrated positions in Apple than in the past with the top 30 holders allocating 2.2% of their fund to AAPL, compared to a high of 4.1% in the last five years and Apple's current 2.9% weighting in the S&P 500," Huberty wrote in a note to investors provided to AppleInsider on Wednesday. "By comparison, institutional funds are overweight (on) all other large cap technology stocks in our analysis."
Morgan Stanley found that the current institutional ownership average among S&P 500 companies is at 83 percent of shares outstanding. It's also increasing at a rate of 80 basis points per year, as individuals increasingly sell their single stocks and buy into mutual funds.
Another company that, like Apple, bucks the trend of higher institutional ownership is electric car maker Tesla. Coincidentally, it was revealed earlier this month that the two companies secretly met to talk about undisclosed matters.
Huberty believes that low institutional ownership of Apple, when compared to other large-cap mobile technology stocks, shows that investors are underestimating the iPhone maker's ability to grow and expand into new markets. For example, she sees growth potential in wearable electronics, as well as new services that Apple could provide with its existing ecosystem of hardware and software.
For example, she believes the launch of a so-called "iWatch" from Apple could generate $17.5 billion from existing iPhone owners in the first year alone. The analyst's projections call for sales of between 32 million and 58 million units in the first 12 months of availability.
Other potential opportunities for Apple cited by Huberty include mobile payments and advertising services. She sees Apple's Touch ID fingerprint sensor and 64-bit A7 processor, along with the company's nearly 600 million App Store accounts and 380 million Bluetooth Low Energy devices on the market, as having laid the groundwork for such services to debut in the future.
Morgan Stanley has maintained its "overweight" rating on AAPL stock with a price target of $630.
Comments
Here we go... another 80 comments about how AAPL is being manipulated.
Good. Institutions do not care about the long term, the welfare of employees, or the quality of products. I'd like to see Apple go completely private. Then they don't have to answer to these so-called analysts.
Those are some pretty broad strokes you're painting with, Gustav. And there is much evidence to the contrary.
My opinion is that the institutional investors are unfortunately listening to the asinine analysts so-often skewered by the readers and editors here and on similar sites. They can only see gloom & doom for AAPL.
What, multi billion dollar institutions want to do things on the up and up?
This article highlights the 'Apple challenge' and probably in and of itself indicates why institutional investors are wary. If even the 'positive outlook' analyst come up with an additionol $17.5 bil in revenue- if the iWatch is a success... That would be a huge success for any startup company, but you have to factor in Apples size and valuation (which is what their stock price is based on) So using their existing revenue:profit ratio that would give Apple an additional $5b in profits a year. Impressive, but also just about exactly the decline in profit Apple saw last year. So *if* their next big thing is indeed released, and *if* it is a success, they could make up for declines in profits from their existing products and maintain flat profits?
That is the up-side.
What is the potential downside?
This is bullish data. The institutional ownership "pendulum" was at the opposite end when AAPL was 700 and we should have been bearish. As an AAPL long I want to see as many shares as possible liquidated by institutions (in order to buy GOOG, TSLA, etc) and end up retired by Pete Oppenheimer, never to be traded again.
Weeks, months, or maybe years from now the pendulum will swing the other way, and the reduced share count will act as jet fuel for the stock price. Patience will be rewarded. Hard numbers prove that these institutions are not smarter than the likes of Carl Icahn, not even close.
I hardly bother to trade AAPL anymore. There are easier places to make money in, that is less frustrating.
I've made more on AIDS lately (biotech firm) than APPL this past week.
I hardly bother to trade AAPL anymore. There are easier places to make money in, that is less frustrating.
I've made more on AIDS lately (biotech firm) than APPL this past week.
Trading is not the same thing as investing. AAPL is good to trade lately if you're into bearish plays like puts, bear call spreads, bearish butterflies, and other option plays.
Investing in AAPL for the long term (5-10 years) is a whole other story and I think will be very rewarding at these prices (IMHO -- caveat emptor)
This has to mean that Apple is doomed to failure and Tim Cook should be fired! Yup...I think so!
/s
Trading is not the same thing as investing. AAPL is good to trade lately if you're into bearish plays like puts, bear call spreads, bearish butterflies, and other option plays.
Investing in AAPL for the long term (5-10 years) is a whole other story and I think will be very rewarding at these prices (IMHO -- caveat emptor)
I totally agree, trading is definitely not the same thing as investing.
I don't doubt Apple as a company, and I will continue to buy plenty of Apple products probably until I drop dead.
Good. Institutions do not care about the long term, the welfare of employees, or the quality of products. I'd like to see Apple go completely private. Then they don't have to answer to these so-called analysts.
Yes, except that isn't true as a rule. It depends on the long term investor. For instance, pension funds. Pension funds want stable stocks with growth potential or dividends. Institutional investors probably are scared away from Apple because the stock is being so heavily manipulated.
Now that made me laugh. I'm considering putting it in my signature.
Agreed, but don't institutions go for the long term investments?
Wankers talking about other wankers and wanking.
I can't better that or agree with it more. Give yourself a pat on the back; any more than that would be onanistic.
Good. Institutions do not care about the long term, the welfare of employees, or the quality of products. I'd like to see Apple go completely private. Then they don't have to answer to these so-called analysts.
Apple could go private if someone steps up with $555 billion (assuming a premium buyout)
Who has that kind of money?
Edit: Ok, I did a little figuring. It would require the 16 wealthiest people in the world to invest all of their net worth to buy Apple.
Not surprising because they know AAPL is being manipulated and they need a long term growth stock to be successful. This analysis points out the magnitude of the manipulation. I don't think it has to do with analysts views about lack of new products from Apple.
This is true, no fund manager is going to risk returns on the company they know if being manipulated, also, Icahn got is hands on the company and I believe institutional investors are scared off by him, since he attempts to take them over and make the company do his bidding.