Hedge funds have become increasingly divided over the shares of Apple.
According to recently filed first quarter holdings, a number of high profile managers unloaded their entire stake in the hot-shot computer and consumer gadgets company. They include Viking Global Investment, Highbridge Capital Management, Brevan Howard, Ivory Investment Management and Passport Capital.
What’s more, John Burbank’s Passport reported it had $275 million of “puts” on the maker of the IPod, IPhone, IPad and Macintosh brands.
In addition, a number of others trimmed their Apple stakes in the first quarter, including Jim Simons’ Renaissance Technologies, which sold about 58 percent of its position after selling shares in the fourth quarter.
At the end of the fourth quarter, Paul Tudor Jones II’s Tudor Investment sold its entire stake of 365,000 shares after taking its initial position in the third quarter.
Even so, at the end of the first quarter, at least six high profile managers counted Apple as their number one holding, including Ken Griffin’s Citadel, even though it dumped more than 41 percent of its shares. Other managers who listed Apple as their top position included D.E. Shaw, Tiger Global, Kingdon Capital Management, Coatue Management and Miura Global Management.
In addition, three managers reported Apple as their second largest holding—Adage Capital Management, Kleinheinz Capital Partners and Tiger Management.
Also during the first quarter, two managers took an initial stake in Apple, including Owl Creek, which counted it as its fourth largest holding, and Appaloosa.
Those managers who have stuck with Apple continue to be rewarded. So far this year, the stock is up another 5.3 percent, to $339.87. Sure, this is slightly behind the S&P 500, which is up 6.6 percent year-to-date.
However, Morgan Stanley recently reaffirmed its highest rating on the stock and its $428 price target, driven by lower priced iPhones, iPod like market share in tablets, and expanding distribution in China and other emerging markets. “In the near-term, we believe concerns over Apple’s gross margin and iPhone units peaking are overdone,” it added in a note to clients.
It believes Apple’s stock discounts a “significant deceleration” in top-line growth that it asserted is unjustified in light of several long-term growth drivers. They include the LTE iPhone upgrade cycle and a lower priced 3G iPhone in 2012, a larger tablet market and continued Apple market dominance longer-term, expanding distribution in China, and potential for Apple to enter the Smart TV market around 2012 or 2013. “While supply constraints could limit upward revisions and a potential CEO transition could limit multiple expansion in the very near-term (next three months) we recommend adding to positions aggressively on pullbacks,” Morgan Stanley stated in the report.
Barclays is even more bullish. It still has a price target of $465 and rates the stock Overweight. “We continue to believe Apple’s valuation is attractive as shares can benefit from iPad and iPhone demand, Mac share gains, international expansion and a pipeline of innovations,” it recently told clients in a report.
It is looking for a new iPhone launch around September or October, which it admits is later than usual. it added in its report: “Regardless, we believe Apple still has momentum with the iPhone 4, the iPad and overseas sales.”
Investors in Burbank’s Passport funds may find this out the hard way.
