While some of the decline is structural (installment/leasing plans), some is cyclical given a dearth of “iconic”phones. The SE strength, overall demand weakness, and our anecdotal work implies the SE is stealing 6s demand indeveloped markets. We believe the SE is reaching its intended market, first-time buyers, in China. Apple intends to lower channel inventory by ~$2bn, or 3mn phones, assuming they are predominantly the 6s. The deepening 6sweakness, of course, will and thus F4Q volumes may not exceed typical seasonality. We model 42mn and 42mn,respectively, which should bring channel inventory solidly below F4Q15’s 4.2 weeks. We also believe Apple will take a conservative view on production to avoid excess channel inventory with the iPhone 7. We find it notable that the supply chain seems equally (if not more) enthralled by the 7s in 2017 (OLED, possibly foldable, bezel to bezel screen, no homebutton, glass casing) as with the 7 (watertight, wireless charging, dual cam).”
Now, let’s take a glance at the latest action surrounding Apple Inc. (NASDAQ:AAPL).
How have hedgies been trading Apple Inc. (NASDAQ:AAPL)?
At Q1’s end, a total of 152 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt, holds the number one position in Apple Inc. (NASDAQ:AAPL). Soroban Capital Partners has a $1.69 billion call position in the stock, comprising 13.6% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $1.243 billion position; the fund has 2.4% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Warren Buffett’s Berkshire Hathaway, Phill Gross and Robert Atchinson’s Adage Capital Management and David Einhorn’s Greenlight Capital. Soroban Capital Partners’ and Berkshire Hathaway’s large positions were brand new position (they must have traded against Carl Icahn). Some of the other funds with brand new AAPL positions are billionaire John Griffin’s Blue Ridge Capital, and Karthik Sarma’s SRS Investment Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Apple Inc. (NASDAQ:AAPL) but similarly valued. We will take a look at Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Berkshire Hathaway Inc. (NYSE:BRK-B). This group of stocks’ market valuations are close to AAPL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GOOGL | 155 | 14981881 | 1 |
| GOOG | 142 | 14902723 | 0 |
| MSFT | 144 | 20830664 | 4 |
| BRK-B | 71 | 19576045 | -4 |
As you can see these stocks, except Berkshire Hathaway, are as popular as Apple among hedge funds. Interestingly though hedge funds’ positions in these stocks were bigger than their positions in Apple. Collectively hedge funds own 5.8% of Alphabet’s outstanding shares, they controlled 4.8% of Microsoft’s outstanding shares, and they had 5.6% of Berkshire Hathaway’s outstanding shares (we excluded Buffett’s ownership stake in Berkshire). On the other hand, hedge funds control only 2.5% of Apple’s shares. This tells us that hedge funds may seem bullish on Apple on the surface but they are really 50% underweight Apple Inc. shares. I don’t think Apple is a good long-term stock to own.
