3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors In Q2 2024: 184
Gotham Asset Management’s Q2 2024 Stake: $93.8 million
Apple Inc. (NASDAQ:AAPL) is the most valuable consumer technology firm in the world. It is a global brand and generates 52% of its revenue through the iPhone. This allows Apple Inc. (NASDAQ:AAPL) a sizeable user base of 1.5 billion users as of 2023, which is its gold mine in the simplest of terms. Apple Inc. (NASDAQ:AAPL)’s closed ecosystem means that its users have to use the firm’s services, and it has used it to create a Services business that generates $78 billion in revenue annually. The user base is also the key to Apple Inc. (NASDAQ:AAPL)’s hypothesis, as the confidence in its ability to ensure that the users continue to upgrade their iPhones. It has also allowed Apple Inc. (NASDAQ:AAPL) to emerge as a late winner in the AI race. Its shares have lost a mere 1.71% since July, which pales in comparison to MSFT’s 11.20% losses. This is because as opposed to MSFT, Apple Inc. (NASDAQ:AAPL) is perceived to be in a better position to monetize AI due to its consumer focused business as opposed to the former’s enterprise focused model.
Baron Funds mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what it said:
“Recent Activity This quarter we re-initiated a position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shis, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on- device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
