Morgan Stanley: Big money moved back into Apple in March Q

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.

Cue the exhibits:
Apple institutions morgan stanley
Apple institutions morgan stanley

Click to enlarge.

Maintains Outperform rating and $326 price target.

My take: Smart money.

5 Comments

  1. David Emery said:
    This could be consistent with my theory (spelled “guess”) that part of the market gains these days are driven by the continued cash flows from retirement contributions that are looking for reasonable companies to invest in. (More money into retirement mutual funds?)

    0
    May 20, 2020
  2. Kirk DeBernardi said:
    I think the better monicker is “wise money” since it took the market so long to recognize that Apple was more than a just a phone company.

    …and maybe they’re just getting started. Good design rewards itself.

    4
    May 20, 2020

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