From a note to clients by analyst Katy Huberty et al. that landed on my desktop Tuesday:
Large jumps in average portfolio allocation increased institutional ownership of large-cap tech stocks in 1Q20, driven mainly by AAPL (+90 bps Q/Q) and MSFT (+70 bps). Meanwhile, allocations to other large-cap stocks were largely unchanged (+/- 10bps Q/Q) in the March quarter.
Largest Q/Q increase in Apple institutional ownership in over a decade. Apple institutional ownership increased 88bps Q/Q to 4.4% exiting the March 2020 quarter, while Apple’s weighting in the S&P 500 grew by 37bps to 5.0%, implying the spread between Apple’s S&P 500 weighting and institutional ownership levels contracted to 53bps, the narrowest spread since June 2014 (2).
Over the last 3 quarters, Apple’s institutional ownership increased by 171bps, the strongest institutional accumulation of Apple shares over a 270-day period since we began tracking this data in 2008, which we believe reflects a few factors.
First, Apple is increasingly viewed as one of the best plays on the upcoming multi-year 5G cycle. Second, Apple offers one of the strongest balance sheets and stickiest customer bases, making it a defensive play during the current pandemic. We see the reopening of Apple’s retail stores, strong Services growth, and the upcoming 5G iPhone launch as catalysts to re-rate shares, with potential upside to our forecasts based on improving data in the month of April and early May.
Click to enlarge.
Maintains Outperform rating and $326 price target.
My take: Smart money.