Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
This market (and corporate profits for that matter!) is in some ways bifurcated in the have (Apple) and have nots. This story in the WSJ takes a look at the % of growth (large cap) fund managers who own Apple, and the answer is essentially “almost everyone”. And not just as a piddly 1% or 2% weighting, almost all these funds (many of which are closet indexers) have it as a 4-5% weighting.
- Out of 465 funds in Morningstar Inc.’s large-growth category, nearly 400 own shares of the personal-technology powerhouse. Of those funds, roughly 320 keep more than 4% of the portfolio in Apple stock. Some 270 have it as 5% or more of assets. That makes it an important driver of fund returns.
- And among large-blend funds, about 63% own Apple shares.
- With Apple recently representing about 4% of the S&P 500 and nearly 6% of the Russell 1000 Growth Index, a zero weighting makes for a hefty bet against the stock.
With the stock at a 20% weighing in the very influential QQQ ETF, 10% weighting on the NASDAQ, and 4% weighting on the S&P 500 obviously this one company is dominant in terms of stock market influence. Only IBM in the Dow (due to its dollar weighted structure) has anything similar in impact. So as a manager if you miss out on the move in Apple you have to do double time in the rest of your holdings simply to keep up. Similarly when the stock is in one of its teflon stages as it is now, the action of the indexes are misleading compared to the body of stocks as a whole.
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We also have seen this in corporate profits – I wrote about this in a few posts in the past [Feb 12, 2012: Apple and AIG Account for Almost All Profit Growth in the S&P 500], but it’s come to the point even Wall Street analysts are reviewing corporate profits for America with and without Apple, as the company’s influence on S&P 500 profits is so huge. Of course Apple is part of the U.S. economy and hence should be included in any analysis of the country’s corporate profits. But in many ways it has become so outsized you really need to look at the S&P 1, and the S&P 499 to figure out how the rest of corporate America is doing.
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