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Apple Inc. (AAPL): Why Are Hedge Funds So Cautious?

Hedge fund activity in Apple Inc. (NASDAQ:AAPL)

At the end of the fourth quarter, a total of 133 of the hedge funds tracked by Insider Monkey held long positions in the stock, unchanged from the end of the third quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, Icahn Capital LP, managed by the aforementioned Carl Icahn, holds the number one position in Apple Inc. (NASDAQ:AAPL). Icahn Capital LP has a $4.82 billion position in the stock, comprising 16.4% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, managed by Ken Fisher, which holds a $1.19 billion position; the fund has 2.3% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Chase Coleman’s Tiger Global Management LLC, Alex Snow’s Lansdowne Partners, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Since Apple Inc. (NASDAQ:AAPL) has experienced bearish sentiment from the smart money, we can see that there exists a select few money managers who were dropping their entire stakes heading into 2016. Interestingly, Rob Citrone’s Discovery Capital Management dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $246.1 million in stock. John Armitage’s fund, Egerton Capital Limited, also said goodbye to its stock, about $161.1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal, especially given the increase in the number of funds in our database).

Let’s go over hedge fund activity in other stocks similar to Apple Inc. (NASDAQ:AAPL). These stocks are Alphabet Inc (NASDAQ:GOOGL), Alphabet Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Berkshire Hathaway Inc. (NYSE:BRK-B). This group of stocks’ market valuations resemble AAPL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOOGL 154 15104780 25
GOOG 142 14216537 23
MSFT 140 23419699 27
BRK-B 75 19339281 6

As you can see these stocks had an average of 128 hedge funds with bullish positions and the average amount invested in these stocks was $18.02 billion. That figure was $17.72 billion in AAPL’s case. Alphabet Inc (NASDAQ:GOOGL) is the most popular stock in this table. On the other hand Berkshire Hathaway Inc. (NYSE:BRK-B) is the least popular one with only 75 bullish hedge fund positions. Apple Inc. (NASDAQ:AAPL) is not the most popular stock in this group but hedge fund interest is still above average. So while Apple remains a popular stock, it undoubtedly took a major hit during the latest quarter, as investors sold off stakes and even bulls cut their holdings. Given that, it’s hard to recommend it at this time, even in light of its attractive valuation.

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