Hedge Funds Are Dumping Apple Inc. (AAPL)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Apple Inc. (NASDAQ:AAPL) changed recently.

Apple Inc. (NASDAQ:AAPL) investors should be aware of a decrease in hedge fund interest in recent months. Apple Inc. (NASDAQ:AAPL) was in 127 hedge funds’ portfolios at the end of March. The all time high for this statistic is 152. Our calculations also showed that AAPL ranked 12th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Apple Inc. (NASDAQ:AAPL).

Do Hedge Funds Think AAPL Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 127 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. By comparison, 123 hedge funds held shares or bullish call options in AAPL a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in Apple Inc. (NASDAQ:AAPL). Berkshire Hathaway has a $108.3636 billion position in the stock, comprising 40.1% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, managed by Ken Fisher, which holds a $7.6727 billion position; the fund has 5.4% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Berkshire Hathaway allocated the biggest weight to Apple Inc. (NASDAQ:AAPL), around 40.07% of its 13F portfolio. Value Star Asset Management is also relatively very bullish on the stock, earmarking 19.02 percent of its 13F equity portfolio to AAPL.

Because Apple Inc. (NASDAQ:AAPL) has faced declining sentiment from the smart money, it’s safe to say that there exists a select few fund managers that elected to cut their full holdings in the first quarter. Interestingly, Jeffrey Talpins’s Element Capital Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $211.4 million in stock. Michael Larson’s fund, Bill & Melinda Gates Foundation Trust, also sold off its stock, about $133 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 19 funds in the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Apple Inc. (NASDAQ:AAPL) but similarly valued. We will take a look at Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). 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
MSFT 251 58964938 -7
AMZN 243 50421816 -30
GOOGL 185 24573668 6
FB 257 40967433 15
TSLA 62 10013166 -6
BABA 135 15497689 -21
TSM 76 10870661 4
Average 172.7 30187053 -5.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 172.7 hedge funds with bullish positions and the average amount invested in these stocks was $30187 million. That figure was $130910 million in AAPL’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 62 bullish hedge fund positions. Apple Inc. (NASDAQ:AAPL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AAPL is 60.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately AAPL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AAPL investors were disappointed as the stock returned 4.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.