Panic selling in a single after-hours trading session has meant technology giant Apple has seen 8.3 per cent wiped off its value, totalling a $62bn drop, as well as putting a dent in more than one in five of all equity funds in the Investment Association universe.
Despite the purveyor of iPhones, Macbooks and most recently Apple Pay beating analysts' sales and revenue expectations again, Apple shares fell after the company reported selling fewer iPhones than forecast and lowered its fourth-quarter profit guidance.
Of course, many of the equity-only funds in the Investment Association are not likely to invest in Apple – although they are not forbidden to – such as those in sectors tilted towards the UK, Europe and China.
The sectors with the highest concentration of funds with a top 10 holding in Apple are IA North America, IA Technology & Telecoms and IA Global.
Two-thirds of funds in the IA Technology & Telecoms sector hold Apple as a top 10 position, while half in the IA North America sector do and one in five in the IA Global sector.
The £463m Henderson Global Technology and £253m AXA Framlington Global Technology funds, both the IA Technology & Telecoms sector, have been hit the hardest by Apple’s fall due to their 9.9 per cent portfolio weighting to the company.
Funds in all IA sectors are not allowed more than 10 per cent of their portfolios in a single stock.
Over the past five years both funds have clocked up robust returns relative to other parts of the market. According to FE Analytics, AXA Framlington Global Technology has returned 97.95 per cent, beating both its sector and index, while Henderson Global Technology has returned 82.15 per cent, meaning it has underperformed both.
Performance of funds, sector and index over 5yrs
Source: FE Analytics
As the biggest US firm by market capitalisation, Apple constitutes the largest single component of the S&P 500 at 3.94 per cent. By comparison the next largest constituent – Microsoft – is less than half this at 1.9 per cent of the index.
This means any holders of a US tracker fund or exchange traded fund would also see hit from Apple’s plunge, according to IG market analyst David Madden, who adds that Microsoft is also due to deliver its quarterly earnings numbers in the next few days.
“Tech traders were spooked by fourth-quarter sales forecast from Apple and concern that the company is becoming too dependent on the iPhone and China also sent speculators searching for the exit,” he said.
“Apple is extremely popular with short and long-term investors, and the stock’s volatility and strong fundamentals make it attractive to both sets of shareholders. Between capital growth and a strong dividend, Apple will remain on investors’ shopping lists, and even though some dealers love to try and call a top on booming stocks, the excellent performance of Apple and the wider tech sector will ensure demand from fund managers.”
“The share is also attractive to those who are not necessarily tech company investors, as their products have now become part of everyday life. Apple crosses over many categories; whether it’s tech funds or tracker funds of the S&P 500 and the Dow Jones, the company will be in high demand from the major players in the market.”
However, Maddon adds that investors could benefit if they buy into the correction.
“The pullback in the share price will give an opportunity for short-term bargain hunters to move in, and the stock’s stellar performance in the past decade will keep it a favourite among institutional investors.”
The US market has lost its shine for many investors in 2015 after its strong performance over the past six years, seeing 44 months without a market correction.
Performance of index since March 2009
Source: FE Analytics
This has led the likes of discretionary fund managers Investment Quorum to scale back US exposure in recent months.
Madden also says Apple's fall was bad news for other funds as despite UK computer chip maker ARM Holdings issuing an sanguine outlook for the second half of 2015 thanks to strong demand for the chips it supplies to Apple, it fell almost 5 per cent in morning trading today.
“It rewarded shareholders with a healthy boost to its dividend, but the move in Apple in after-hours trading lead the stock lower this morning,” Maddon said.
A further nine funds in the Investment Association hold ARM Holdings as a top 10 position while two funds with Apple in their top 10 also hold ARM.
The £1.3bn CF Purisima Global Total Return has just under 10 per cent split between the two stocks, while the £200m GLG Technology Equity has a combined 13.5 per cent in the two.
Seven investment trusts also hold Apple as a top 10 holding including the Allianz Technology Trust, managed by Walter Price who holds the stock as his largest holding. He told FE Trustnet back in June its newest product the iWatch could mean a new chapter of growth for Apple.
“It is not going to be a game-changer in the way that a lower cost phone might be [but] we believe some innovation in this area might be in the pipeline, and may be announced before 2016. The potential for this type of blockbuster product is influencing our view of Apple, which remains our largest holding,” he said earlier in the year.