Barron’s talks Apple Inc. “problem” — What is it?
An article in today’s print Barron’s titled, The Apple of Your Fund’s Eye by Avi Salzman notes that Apple Inc. (NASDAQ:AAPL) is not only a fund favorite but 3.94% of the S&P 500(INDEXSP:.INX), 14.38% of the PowerShares QQQ Trust, Series 1 (ETF)(NASDAQ:QQQ), 3.3% of the Russell 3000(INDEXRUSSELL:RUA), 3.3% of the average mutual fund and 3.9% of the average large-stock fund (as provided by Morningstar).
What is the Apple Inc Problem?
Salzman describes this as the Apple “problem” which he puts in quotes, noting that it’s not really a problem in a true sense. He quantifies this as several different factors including the fact that its growth has increased the size and significance of the company in people’s portfolios, additionally that its omnipresence in funds has created issues for diversification, and finally on the other side of the coin that if a fund manager doesn’t own it he subjects himself to risk of being criticized if he under-performs.
The universe of large-stock funds that have been beaten the S&P 500 without owning Apple Inc. (NASDAQ:AAPL) is only 53 over the last 3 years.
Apple Inc. (NASDAQ:AAPL)’s stock has doubled in the last 2 years, hardly a problem.
In the end he does note that of all problems to face the Apple problem is a good one to have as the company continues to produce innovative products and break sales records while growing its dividend. The author also notes that Apple is still trading at only 15 times forward earnings which hardly is pricey.
The Real Risk Behind Apple
The article ends pointing out that because Apple need to continue producing hot new products it has a different kind of risk unlike former giants like General Electric or ExxonMobil. It is true additionally that the risk of Apple Inc. (NASDAQ:AAPL) is simply that the company is in the field of technology and that field is much more uncertain and rapidly changing then many others. It’s very difficult to see far into the future with technology.
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