Hedge Funds Dumping Apple Inc. (AAPL) and Trusting Facebook

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Apple Inc. had lost appeal among hedge funds, who are shunning its shares in favor of social-network stocks. In Q4 2015, Apple shares were the most sought after by hedge-fund managers, but they morphed into an asset that investors were not able to sell fast enough in Q1 2016, says a report from Market Watch.

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Hedge Funds losing interest in Apple

In the first-quarter, Apple stock transitioned from being a gadget-making darling to pariah for the hedge funds. FactSet arrived at this conclusion after a detailed review of the quarterly public filings of the 50 largest hedge funds. These funds are required to make a public disclosure of all long positions of at-least $100m held at the end of each quarter.

Overall, the investment managers unloaded tech stocks worth some $18.7bn, and the technology sector was the one that saw the steepest selloff among the top 50 hedge funds. The iPhone firm had to bear the brunt of that tech divestiture as the hedge funds shed $7.1bn in Apple in the Q1.

The biggest hedge-fund seller in the Q1 was the activist investor Carl Icahn, who dumped Apple’s shares worth $4.3bn. However, not everyone is shunning Apple shares. Warren Buffett’s Berkshire Hathaway revealed a stake worth $1bn in the iPhone maker in the Q1.

Worries surrounding Apple Inc. intensified after it reported its first quarterly revenue decline in 13 years in April. Investors sold Apple shares following the lackluster Q1 earnings, and the analysts are concerned that the firm will no longer be able to grow sales. This comes as a surprise though as the iPhone maker is one of the worlds’ most valuable firm, and boasts of a market cap of $516bn.

Facebook becomes favorite

When the hedge funds were ditching Apple, they were picking up shares of Facebook. FactSet data showed that the top hedge funds acquired shares of the social network giant worth more than $3bn.This move of theirs makes sense considering Facebook gained 9% in the Q1 while Apple Inc. rose 3.5% in the same period. Facebook has made an advancement of 12.1% on a year-to-date basis while Apple declined by nearly 10%.

“Waning appetite for Apple shares also comes as hedge-fund investors dialed back their exposure to stocks during a period in which the Nasdaq Composite Index is on track to log its worst annual loss, down 4.8%, in about eight years Back in 2008, the tech-laden index tumbled 41%. Meanwhile, the other stock-index benchmarks have mostly languished, trading in a narrow range this year,” the report says.

This year has not been good for the hedge-fund sector even. Data from Hedge Fund Research indicates (measured using the HFRI Fund Weighted Composite Index), managers on average were down 0.7% in Q1 2016 versus a climb of 0.7% for the S&P 500.

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    Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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