Morgan Stanley: Institutional ownership of Apple is rising

Apple’s weighting in the S&P 500 is growing even faster, says analyst Katy Huberty.

From a note to clients that landed on my desktop Tuesday:

Apple institutional ownership increased 52bps Q/Q to 3.5% exiting the December 2019 quarter, while Apple’s weighting in the S&P 500 grew by 73bps to 4.6%, implying the spread between Apple’s S&P 500 weighting and institutional ownership levels expanded to over 100bps vs. 82bps at the end of the September quarter.

At 3.5%, Apple’s institutional ownership at year end was at its highest level since 3Q12, while at 4.6% Apple’s year-end weighting in the S&P was the second highest on record in the last 11 years (3Q12 S&P weighting was 4.9%). And over the 2 quarters ending December 31st, 2019, Apple’s institutional ownership increased by 83bps, the strongest institutional accumulation of Apple shares over a 180-day period since 2012, which we believe reflects investors’ increasingly positive outlook…

In recent days, Apple stock has pulled back 7% due to the COVID-19 outbreak limiting the pace of iPhone production; however, we’re buyers on weakness as we view the near-term impact as more of a timing issue rather than outright supply/demand destruction, and see strong Services/Wearables growth and the upcoming 5G iPhone launch as catalysts to re-rate shares towards our $368 price target.

Maintains Overweight rating and $368 target. 

Apple institutional ownership huberty

Click to enlarge. 

My question: Yahoo Finance shows 62.7% of Apple shares held by institutions, yet Huberty has “institutional ownership” at 3.5%. What am I missing? I’ve asked the analyst.

Answer (from friends of the blog): 3.5% represents the share of all institutional holdings that are AAPL.

7 Comments

  1. Paul Brindze said:
    Just a guess, but perhaps she means that 3.5% of all institutional money is in Apple. In other words if all institutions are looked at as one giant investment pool, 3.5% of that pool would be invested in Apple.

    1
    February 25, 2020
  2. Gregg Thurman said:
    3.5% represents the share of an institutions holdings that are AAPL.

    62.7% is the share of outstanding AAPL shares held by institutions. It wasn’t that long ago that institutions held just over 50% of all AAPL shares. So 62.7% is a major change, but not a major increase in the actual number of shares held by institutions. The increase can be directly attributable to Apple’s buyback program, which is sucking out retail holdings.

    Under these conditions I don’t see institutions adding much more AAPL to their respective portfolios. The buybacks are increasing their share of Apple, while price appreciation is increasing AAPL’s weighting within their respective portfolios.

    3
    February 25, 2020
  3. David Emery said:
    Two observations from this chart:
    1. It’s clear that S&P 500 index funds don’t predominate ownership. (If so, then ‘current holding’ would be closer to ‘percentage of S&P’.

    2. The lack of institutional holdings in MSFT, compared to its S&P position, is surprising. I’m presuming the mark for ‘prior holding’ is underneath the mark for ‘current holding’, showing no real change in MSFT investment despite how much MSFT has grown in the S&P. Conversely, institutions seem to be more favorably inclined towards Oracle, that’s the stock with significant more institutional holdings vs S&P. (Frankly, I’d rather own MSFT, particularly after the recent articles on how badly Oracle is doing in cloud computing.)

    0
    February 25, 2020

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