by Michael Tarsala
Apple this week became the most valuable company of all time.
But why should you, an individual investor, even care unless it’s driving your portfolio performance?
Even if you don’t Apple directly, here are five reasons:
1) You may own a big bite of Apple and not realize it
If you invest broadly, chances are you own at least some of Apple (AAPL). The stock makes up 4.65% of the S&P 500, more than Microsoft (MSFT) and IBM (IBM) combined. And it is very widely held by mutual funds and Covestor investment managers. Apple may be one of the drivers of your investment performance whether you realize it or not.
2) As Apple goes, so goes the largest stock sector
The tech sector’s performance would be downright shoddy without Apple. Tech accounts for 20.2% of the S&P 500, more than any other sector. According to the Wall Street Journal, the S&P 500 ‘s tech sector is up 16% since the October 2007 market peak. Take away Apple, and it is down 3.7% over that same period.
3) Apple is a major purchaser
Apple is the world’s leading semiconductor buyer, so it’s a driver of many other companies and their stocks. It is expected to buy nearly $28 billion worth of semiconductors this year, up 15% from 2011, according to market research firm iSuppli.
4) Apple holds major earnings sway
My former colleague John Butters at FactSet noted in July that tech has the third-highest earnings growth rate at (5.4%), and the second-highest sales growth rate (6.1%) of all S&P 500 sectors. Exclude Apple, and tech’s earnings growth falls to 0%. The sales growth rate would be cut in half (3.0%). Beyond tech, Apple is among only a handful of companies large enough to sway overall S&P 500 earnings growth rates.
5) Analysts believe Apple shares can go even higher
Jefferies analyst Peter Misek recently boosted his price target on the stock to $900. Toni Sacconaghi at Bernstein reiterated his Buy rating and a $750 target early this week, as well. Yes, analysts tend to have a bullish bias, but not with Apple. As a group, they continue to be surprised by its earnings. The company has missed earnings only twice since 2003. Prior to last quarter’s miss, Apple had beaten analyst expectations by 17%, on average, in its eight previous quarters.
How much Apple might you own? And is it the right amount for you?
If you would like to talk about your Apple exposure, or specific Covestor offerings that may increase or limit your exposure to the stock, call us at 866-825-3005, X 703 in our New York office. We are a registered investment adviser.
Invest with us, and your money is held in a top-tier brokerage account bearing your name, separate from everyone else’s money. It’s not sloshing around in a big pool run by us or some third party, and there is no one earning interest on it.
It’s your own account; you can see the balance change on a daily basis, make investment changes extremely quickly, and add to or pull your money at your complete discretion.
