3. Apple Inc. (NASDAQ:AAPL)
Short % of Shares Outstanding: 0.89%
In the second quarter of 2024, short sellers faced significant losses, losing billions of dollars by betting against major, well-known stocks like Apple Inc. (NASDAQ:AAPL). It was among the three least profitable short positions during this period, as its stock price jumped by 23% in Q2 2024. According to analysts, weak iPhone sales and regulatory challenges in the EU and the USA may be affecting sentiment, but the influence of market perceptions on interest rate trends should not be overlooked either.
In fiscal Q3 2024, Apple Inc. (NASDAQ:AAPL) reported a 14.5% QoQ decline in its iPhone sales at over $39.2 billion. The company’s overall revenue for the quarter came in at $85.7 billion, which saw a 5% hike from the same period last year. During the quarter, the company was pleased to reveal significant updates to its software platforms at the Worldwide Developers Conference. Among these updates was Apple Intelligence, a revolutionary personal intelligence system that integrates advanced, private generative AI models into iPhone, iPad, and Mac devices. Despite its declining iPhone sales, analysts are still optimistic about the company. Baron Funds also discussed this in its Q2 2024 investor letter. Here is what the firm has to say:
“The Fund’s chief relative detractor was Apple Inc. (NASDAQ:AAPL), even though it was a meaningful contributor to absolute performance, as we added to our Apple position significantly during the period. We bought Apple well, but in 20/20 hindsight we didn’t buy enough. Because Apple has an oversized weight in the Benchmark (its average weight was 15.7% for the period), when Apple’s stock outperforms (it appreciated 23.0%), it has generally been a headwind to relative performance. Our Apple underweight accounted for 33% of our relative underperformance for the period.
This quarter we increased the size of our 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 shifts, 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.”
Apple Inc. (NASDAQ:AAPL) also reported a strong cash position. The company generated over $29 billion in operating cash flow and returned $32 billion to shareholders through dividends and share repurchases during the quarter. Moreover, the company has been growing its dividends consistently for the past 12 years, which makes AAPL one of the best Warren Buffett dividend stocks. Its quarterly dividend currently sits at $0.25 per share for a dividend yield of 0.45%, as of September 15.
Apple Inc. (NASDAQ:AAPL) garnered a lot of attention from elite money managers during the second quarter of 2024. Insider Monkey’s database of Q2 2024 indicated that 184 hedge funds held stakes in the company, growing from 150 in the previous quarter. The consolidated value of these stakes is over $124 billion.
