It’s unquestionable that Apple Inc. (NASDAQ:AAPL) represents one of the best stocks that an investor can have in his or her portfolio. The company has provided steady returns to its investors over the years and its business model is great to take advantage of a saturated smartphone market. There is a widespread bullish consensus on Apple across the entire market and the recent “thumbs-up” given to the stock by billionaire Warren Buffett‘s Berkshire Hathaway only added to the hype.
In general, smart money likes Apple Inc. (NASDAQ:AAPL), which was called a “no-brainer” stock by billionaire activist Carl Icahn. Even though Icahn closed his stake last year over concerns about China, other investors remained confident that the stock will perform strongly over the years. So let’s take a closer look at what the general hedge fund sentiment towards Apple is and try to identify the main reasons why the market is bullish on the stock.
We identify hedge fund sentiment by analyzing the 13F filings of over 700 hedge funds and other institutional investors from our database. We assess how many funds are invested in an individual company, the aggregate value of their holdings, as well the changes in these figures on a quarter-over-quarter basis. In turn, this data helps us to develop investment strategies. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see more details).
In Apple Inc. (NASDAQ:AAPL)’s case, it should be noted that the company registered a decline in popularity among hedge funds during the fourth quarter of 2016. Overall, there were 113 funds long the stock at the end of December, versus 145 funds a quarter earlier. On the other hand, the total value of their holdings appreciated to $16.54 billion from $16.22 billion. However, much of this increase is due to Berkshire Hathaway boosting its stake. In its latest 13F, Warren Buffett’s holding company reported holding 47.36 million shares worth $6.64 billion, which is roughly 40% of the aggregate value of hedge funds’ holdings. Among other top investors that raised their exposure to Apple between October and December were David Einhorn‘s Greenlight Capital, which increased its stake by 12% to 5.81 million shares and Larry Robbins’ Glenview Capital, which added 2.47 million shares to its position, reporting ownership of 3.15 million shares in its latest 13F filing.
However, since the number of funds bullish on Apple Inc. (NASDAQ:AAPL) fell, there were also some investors that unloaded their entire positions during the final three months of 2016. Among those funds was Chase Coleman‘s Tiger Global Management, which sold all of its previously-held 3.61 million shares and Aaron Cowen’s Suvretta Capital Management, which dumped its stake of some 2.60 million shares. Moreover, among the top sellers of Apple’s shares were Philippe Laffont’s Coatue Management, which cut its position by 3.31 million shares to 3.19 million shares and Israel Englander’s Millennium Management, which sold 2.59 million shares, remaining with just 369,540 shares heading into 2017.
On the next page, we are going to share excerpts from hedge fund investor letters that summarize their investment thesis and our take on this.