Hedge Funds Apple Inc.
Hedge Funds Continue Buying Up Shares of Apple Inc.
Hedge funds are continuing to buy up shares of the computer and software giant, Apple Inc. (AAPL). That the company has a presence in computer, software, home entertainment, smart phones and MP3 players, makes it an attractive purchase for its potential to expand in these niche markets. David Einhorn also refers to the "halo effect", meaning the trend among Apple customers to buy other Apple products, usually increasingly larger, more expensive products.
Why are hedge funds chasing Apple?
Hedge-fund guru David Einhorn made the media rounds this week promoting his stake in Apple. In his interviews, Einhorn focused mainly on the "halo effect" associated with Apple products. After buying an iPhone, users tend to move on to Macs or iPads, creating a cycle of higher revenue for the company. Einhorn also placed emphasis on the company’s reasonable valuation, citing its cheap multiple for a company displaying such outsized growth.
The hedge-fund world is extremely diverse, with a wide variety of investing styles and techniques. For example, in addition to promoting Apple, Einhorn also listed Sprint and Vodafone as top picks. While the Apple story is one of a strong brand and growth at a reasonable price, the thesis for buying Sprint is centered on valuable spectral assets and Vodafone is usually seen as an undervalued company whose price will spike once its Verizon Wireless joint venture with Verizon begins paying out cash dividends.
However, despite all the diversity seen in this sector's investing approaches, the love for Apple is unparalleled in the hedge-fund world. Goldman Sachs releases a quarterly list of the most popular stocks held in fundamentally driven funds, and Apple leads the list as a top 10 holding in 75 funds. The second-place stock, JPMorgan Chase, appears in only 42 funds. Obviously, Apple's size plays a part here, but for comparison, peer Microsoft is a top 10 holding in only 34 funds. Source
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