Even so, institutional investment is not keeping up with Apple’s weighting in the S&P 500, according to analyst Katy Huberty.
From a note to clients that landed on my desk Friday:
Apple’s institutional ownership continues to reach new highs, but increased less than its index weighting. Apple’s institutional ownership increased by 45bps Q/Q, to an all-time high of 5.5% exiting the September 2020 quarter, while Apple’s weighting in the S&P 500 grew by 88bps, also reaching an all-time high of 6.7%.
Over the last 12 months, Apple’s institutional ownership has increased by a record 250bps, yet Apple’s weighting in the S&P 500 has increased by over 280bps, which shows that despite record accumulation over the last year, institutional investors are still underweight Apple shares. In fact, the spread between Apple’s S&P 500 weighting and institutional ownership levels at quarter end was 115bps, the widest margin since C3Q18.
In our view, there are three primary factors that have contributed Apple’s record year of institutional share accumulation:
- optimism that record-long replacement cycles, a new portfolio of industry-leading 5G iPhones, and increasing adoption of trade-ins and financing programs would drive a period of accelerated iPhone purchases over the next 12 months,
- broad product strength due in large part to a record product announcement year and sustained work, learn, and play from home demand, and
- growing penetration and monetization of Apple’s Services businesses.
Many of these catalysts have already begun to play out over the last 3-6 months and our early iPhone 12 data shows that lead times for the iPhone 12 Pro and iPhone 12 Pro Max are 3-4 weeks, at or above record levels at this time post-launch, which has historically been an early indicator of strong shipment growth.
Apple remains our Top IT Hardware Pick into 2021 and we see positive consensus estimate revisions driving the next leg of Apple outperformance over the next 12 months.
Maintains Overweight rating and $136 price target.
My take: Of the 17.1 billion Apple shares outstanding, according to Thomson Reuters, 59.72% are held by institutions.
Interesting. The issued share count is shrinking, but so is the percentage held by institutions. There’s only two places those shares have gone: Into private hands, and back to Apple, where they’re removed from circulation. I’d note that volume was anemic again today, with ~78 M shares trading hands versus a still-shrinking average share volume of 127 M shares. So even if an institution wants to build up its AAPL holdings, it’s going to have to fight with Apple to do it….
My take: yet again even though they sound like they get it, they still don’t get it. Apple is not an IT hardware company. It produces a portfolio of products and services in an ecosystem to enrich and soothe people’s everyday needs in a manner more addictive and sticky than crack.
Analysts are grasping for explanations and a narrative which they don’t realise is still blinkered by their own narrow view of the market and an obsession with categorising and labelling.
Apple straddles so many domains that it defies traditional categorisation. Its relationship with its customers is intimate and seductive in an unmatched and unparalleled manner by any other company in the mass market space.
Analysts notes … so close, but as usual so far off and looking in the rear view mirror for visibility ahead.
Lastly, Apple doesn’t fit into any category, it’s a category unto itself. Don’t believe me? Compare Apple’s mkt cap with entire categories/sectors.
When someone on WS recognizes that, and says so, then it will be official, somebody gets it.
Without that paradigm leap in not just the GUI but the entire ecosystem of pioneering WYSIWYG and connectivity to printers and hard drives I would never have been able to do that, and disrupt an entire sector of the publishing world in my own small way.
All these decades on and nobody has yet managed to offer seamless solutions in such a compelling and empowering way.
Apple is way out there on its own, just as its founders imagined it would be in the 80s while they were literally tripping the light fantastic walking in the beach on LSD.
Apple started in a garage. Later, the Macintosh enabled me to start my publishing dreams from my bedroom. Food for thought isn’t it. It’s a shame most people don’t have a historical perspective and understand how powerful a movement Apple created rather than just thinking of it as a pioneering computer manufacturer.
If Apple is a category onto itself (I believe it is), what do we call that category? Anyone, everyone?
My guess: Consumer Vertical Technology Stacks
Complex, isn’t it? So is Apple.
Because Apple gives its customers and ecosystem partners “the best”, they thrive. Because they thrive, they spend more on Apple and bring more people into Apple’s ecosystem.
It’s OK that Katy puts Apple in a box. She has an audience.
I see positive, as in room to grow. But they will take a long time to understand Apple.