We recently compiled a list of the 10 Most Owned Stocks by Hedge Funds Right Now. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against the other stocks owned by hedge funds.
Wall Street stocks surged this month after the Federal Reserve released minutes of its September meeting, which resulted in the first interest rate cuts in over four years. The details disclosed a ‘substantial majority’ of central bankers backing the 0.5 percentage-point cut, raising optimism among investors for further cuts ahead.
The broader market hit record highs on October 11, driven by several financial stocks reporting stronger-than-expected results during the recently concluded quarter. Another factor encouraging investors has been the downturn in US inflation, which fell to 2.4% in September and is inching toward the Federal Reserve’s goal of a two percent annual rate. This has raised hopes of a quarter-point cut in the central bank’s next meeting in November.
However, some analysts warn against diving into stocks after interest rate cuts, citing uncertainty around the upcoming presidential elections. Liz Young Thomas, the head of investment strategy at SoFi, while talking to Business Insider in early September discussed historic patterns in US markets towards the end of the third quarter and the beginning of the fourth.
She noted how the market performs well between June and August due to thinner volumes when traders are on vacation, while volatility picks up with an uptick in activity after they return to their desks in September. However, during the election year, this volatility peaks around mid-October, instead of September, according to Young Thomas.
Fundstrat Global Advisors’ co-founder, Tom Lee, has also cautioned investors against election-related uncertainty. Here is what he stated in an interview with CNBC late last month:
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
Earlier that month in the weeks leading to the interest rate cuts, Lee, who is generally bullish on the stock market, forecasted a 7-10% dip between September and October amid nervousness around the presidential elections. However, Lee urged investors to ‘buy the dip’, indicating that he sees the likely fall as an opportunity to buy stocks while they trade for a lower value.
Adam Turnquist from LPL Financial also anticipates seasonal volatility in the weeks ahead but reiterated what Lee did, that the dip presents an opportunity to buy when the share is trading low and earn high returns when the market stabilizes. Turnquist advises investors not to readjust their existing portfolios because seasonal volatility has short-term effects and is difficult to forecast.
With that said, let’s now shift focus to hedge fund sentiment on the stock market and discuss some of the most widely held stocks by hedge funds.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 and picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a leading American technology company known for its consumer electronics, software, and other related products. According to Insider Monkey’s database for Q2 2024, it is one of the most owned stocks by hedge funds right now, with 184 hedge funds having investments in the company.
On August 1, Apple announced strong third-quarter results, generating a record revenue of $85.8 billion. This was a 5% growth from last year. Revenue from products grew 2% year-over-year to reach $61.6 billion, driven by the momentum gained from the launch of iPad Pro and iPad Air. Services revenue climbed 14% to a record-high $24.2 billion. Apple’s gross margin was reported at 46.3%. EPS for the quarter stood at $1.40, beating analysts’ expectations of $1.35 per share.
A significant chunk of Apple Inc. (NASDAQ:AAPL)’s overall revenue during the quarter came from iPhone sales, which totaled $39.3 billion. However, the figure was down 1% year-over-year, due to a 6.5% drop in sales in Greater China, where Apple continues to face fierce competition from local manufacturers such as Huawei. This has led to some concern among investors around the stock.
Another recent event that set the alarm bells ringing for some investors has been Warren Buffett’s Berkshire Hathaway slashing its stake in Apple by half. The company’s shares dropped 5% after the announcement on August 5, but have since then recovered. Financial experts believe that Buffett’s selling spree was triggered by speculation of an impending increase in the capital gains tax, and not due to Apple’s financial performance.
Despite the cuts, Apple Inc. (NASDAQ:AAPL) continues to be the top stock in the billionaire’s portfolio, accounting for over 30% of the total holdings. You can read more on this in our recent article, Buffett Stock Portfolio: Top 10 Stock Picks for 2024.
Wall Street analysts have a consensus on the stock’s Buy rating, and the integration of artificial intelligence in the newly launched iPhone 16 has renewed investor confidence. Mar Vista Focus strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
Investors were reminded of the strength of the Apple Inc. (NASDAQ:AAPL) ecosystem as management demonstrated how generative AI solutions would be integrated into Apple’s 1.2 billion iPhone installed base. Apple plans to integrate generative AI features into its iOS 18, which will be broadly released in the fall with the iPhone 16. We believe Apple should benefit from generative AI as it will spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth ranging between high-single-digits and low-double-digits over our investment horizon.
iPad sales are also surging, having risen 24% during Q3 to reach $7.2 billion. Mac revenue grew 2% year-over-year to a total of $7 billion. The overall outlook for Apple looks encouraging as we enter the backend of 2024.
Overall AAPL ranks 5th on our list of the most owned stocks by hedge funds right now. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
