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.