This Metric Says You Are Smart to Sell Apple Inc. (AAPL)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized in financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Apple Inc. (NASDAQ:AAPL).

Ellica /

Ellica /

Is Apple Inc. (NASDAQ:AAPL) the right pick for your portfolio? Money managers are in a bearish mood. The number of long hedge fund bets was cut by 11 recently. AAPL was in 133 hedge funds’ portfolio at the end of September. There were 144 hedge funds in our database with AAPL holdings at the end of the previous quarter.

Today there are a large number of methods that stock market investors have at their disposal to value stocks. A couple of the less known methods are hedge fund and insider trading indicators. Experts at hedge fund tracking site Insider Monkey have shown that, historically, those who follow the top picks of the elite money managers can outclass the S&P 500 by a solid margin (see the details here).

Keeping this in mind, we’re going to review the latest action surrounding Apple Inc. (NASDAQ:AAPL).

How are hedge funds trading Apple Inc. (NASDAQ:AAPL)?

At the end of the third quarter, a total of 133 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully.

According to hedge fund experts at Insider Monkey, Carl Icahn’s Icahn Capital LP had the biggest position in Apple Inc. (NASDAQ:AAPL), worth close to $5.82 billion, amounting to 20.9% of its total 13F portfolio. The second largest stake is held by Greenlight Capital, led by David Einhorn, holding a $1.24 billion position; the fund has 20.5% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise Ken Fisher’s Fisher Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management.

Since Apple Inc. (NASDAQ:AAPL) has faced falling interest from hedge fund managers, we can see that there were a few hedge funds that slashed their positions entirely last quarter. At the top of the heap, Jim Simons’s Renaissance Technologies said goodbye to the largest position of the 700 funds monitored by Insider Monkey, worth an estimated $214.8 million in ‘Call’ options., and Leon Shaulov of Maplelane Capital was right behind this move, as the fund cut about $144.2 million worth of stock. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 11 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Apple Inc. (NASDAQ:AAPL). These stocks are GOOGL, GOOG, MSFT, and BRK-B. This group of stocks’ market values match AAPL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x$1000) Change in HF Position
GOOGL 129 11299124 14
GOOG 119 10181129 12
MSFT 113 19313046 6
BRK-B 69 19441856 -2

With this in mind, it seems that smart money investors are underweight AAPL as they amassed just 2.80% of the company’s outstanding stock at the end of September. Moreover, as can be seen from the table above, hedge funds are apparently swapping their Apple stakes for positions in other tech giants like Google or Microsoft.

Disclosure: none