2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders In Q2 2024: 184
AQR Funds’ Latest Investment Stake: $1.73 billion
Apple Inc. (NASDAQ:AAPL) dominates the global consumer electronics industry courtesy of the iPhone. SEC filings show that 52% of the firm’s revenue comes from smartphones. Consequently, the iPhone is the central pillar on which Apple Inc. (NASDAQ:AAPL)’s hypothesis rests as it allows the firm to have a user base of roughly 1.46 billion users. This user base is used by investors to gauge the firm’s future revenue by estimating when these users will upgrade their devices. The iPhone’s strength has also enabled Apple Inc. (NASDAQ:AAPL) to create a $78 billion Services business by providing software service and taking payments from Google to make Google Search the default platform on its devices. Consequently, investors are also evaluating Apple Inc. (NASDAQ:AAPL) for its ability to monetize consumer AI services through Apple Intelligence. Furthermore, any iPhone upgrade weakness or government action that stops Google’s payments could spell trouble for Apple Inc. (NASDAQ:AAPL)’s stock.
Baron Funds mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what the firm 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.”
