This content is from: Portfolio

Hedge Funds Take Bite Out of Apple Holdings

Apple still remained one of the hot stocks among hedge funds at the end of the fourth quarter. However, many of the funds closed out their positions or took a big bite out of their holdings.

Apple still remained one of the hot stocks among hedge funds at the end of the fourth quarter. However, many of them closed out their positions or took a big bite out of their holdings.

The most drastic move was taken by Paul Tudor Jones II’s Tudor Investment, which sold its entire stake of 365,000 shares after taking its initial position in the third quarter, according to recent regulatory filings. In addition, Ricky Sandler's Eminence Capital sold 254,000 shares, and Brett Barakett's Tremblant Capital sold 118,000 shares.

In addition, a large number of hedge funds trimmed their Apple stakes in the fourth quarter, including Stephen Mandel Jr.’s Lone Pine Capital, which unloaded 37 percent of its position or nearly one million shares. As a result, Apple represented his fourth largest holding at the end of the period. In the third quarter he added 450,000 shares to his position, making it his largest holding on Sept. 30.

Other sellers in the fourth quarter included Jim Simons’ Renaissance Technologies and John Griffin’s Blue Ride Capital. However, Apple remained Blue Ridge’s second largest position.

While some attention has been brought to the number of hedge funds that sold their Apple shares, a further examination reveals that a number of large, high profile hedge funds that reduced their Apple stake in the fourth quarter still retained the stock as their top holding. They include David Shaw’s D.E. Shaw, Chase Coleman’s Tiger Global and John Kleinheinz’s Kleinheinz Capital Partners.

Apple also is still the number one holding for Joe DiMenna’s Zweig-DiMenna Partners and Philippe Laffont's Coatue Management.

So far investors who held on to their Apple shares are looking smarter. The stock is up more than 8 percent this year despite dropping $7.74, or 2.16 percent, on Friday alone.

In fact, Wall Street’s analysts are still hot on the stock, although history does tell us that they are not exactly on the cusp of changing sentiment. Still, Standard & Poor’s recently repeated its Strong Buy rating and its $420 target price after a Wall Street Journal report that Apple has begun production of a new iPad, which will have a front-facing camera, more memory, and a faster graphics processor.

S&P said it projects 23 million iPads will be shipped this year. “Assuming improved scale for the display, processors, and baseband, and attractive memory prices, we expect improving segment margins as well,” it told clients in a recent note.

Barclays rates Apple Overweight and has a $450 price target. “We continue to believe that Apple's valuation is attractive and that the shares can benefit from strong iPad and iPhone 4 demand, Mac share gains, significant international expansion, and a pipeline of new innovations,” the bank recently told clients in a report.

In fact, it said its research indicates the iPad is gaining popularity at corporations. It notes the iPad can reduce printing costs, give medical data on the go and is showing up in more hotel lobbies.

Meanwhile, Barclays said Apple may be working on a new low-end line of iPhones intended for sale this summer. It believes the device is half the size of the iPhone 4 and would be available to cell phone carriers at about half the price of current iPhones.

Barclays also points out in the report that China's Ministry of Finance recently announced it lowered the import tariff to 10 percent from 20 percent on "IT products" and halved the import tariff on iPads. “We believe that this news could help expansion in China,” the bank adds.

It seems the smart money set are the ones who are holding on to their Apple shares...for now.

Related Content