Wednesday, July 10, 2013

Apple dead money as rest of market takes off


The main entrance to Apple's headquarters in Cupertino, Calif. (Photo: AFP/Getty Images)


Apple was the market's speedboat, but now, the stock is acting more like an anchor.


The market is bursting higher, and the Standard & Poor's 500 is up 15.9%, and 1.0% below its record high. Meanwhile, the tech-laden Nasdaq is at its highest point in this bull market, at levels not seen since late 2000. Yet, one stock noticeably absent is Apple, which, not long ago, was the most valuable stock in the market and widely believed to be the engine of growth.


Clinging to Apple is getting expensive. The stock has fallen 21% this year, a clear sign that large investors have moved on. The S&P's 2013 gain would have been 17.4% without Apple, says S&P Dow Jones Indices.


Many investors who stuck with Apple as it dropped are individuals, says Ryan Detrick of Schaeffer's Investment Research. 'The institutions are getting out,' he says.


The effects of Apple's downfall are far-reaching and include the loss of:


* Importance on Wall Street. Apple was so dominant a year ago, analysts had to look at the market both including Apple and excluding it. Apple commandeered the Nasdaq 100 index for instance, accounting for more than 20% of its value in 2011. The Nasdaq 100 is a collection of the most valuable 100 non-financial stocks in the Nasdaq. The stock's current weighting is 11.4%. Apple is now only expected to bring in 2.9% of the earnings of the S&P 500, down from the 6% peak in the fourth quarter of 2011. Pain in tech is greater, as the information technology sector is down 1.3% since Apple hit its high on Sept. 19, 2012. Without Apple, it would be up 11.4%, says S&P Dow Jones.


* Market leadership role. Much of the market's current power is coming from shares of smaller, less-followed companies that have exciting new products and innovation ahead of them, Detrick says. The Russell 1000 index of small stocks, which excludes Apple, hit another record Wednesday. 'Money is rotating and going into different areas,' he says. Financials, too, have been leaders that have picked up for Apple's slack.


* Standing among big-name tech firms. While Apple struggles, tech investors are happy to shift to faster-growing tech firms such as Amazon and Priceline, which are becoming the new tech leaders, says Ken Winans of Winans Investments.


The fact that so many individual investors piled into Apple at or near its peak, yet failed to get out, underscores why many are disappointed even as market indexes hit new highs, Detrick says. While diversified investors are enjoying the rally, people still waiting for Apple's comeback, 'do not feel that way,' he says.


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