Apple’s gigantic impact: Apple’s meteoric rise is distorting everything

“It happened almost a year ago, and it’s happening again,” Shah Gilani reports for Money Morning.. “The meteoric rise in Apple Inc.’s stock price is distorting the major benchmark indexes, including the Nasdaq-100, the Nasdaq Composite, and the S&P 500.”

“That is still true even though the Nasdaq executed a “special rebalancing” of its Nasdaq-100 tech-heavy index to reduce Apple’s 20% weighting down to 12% last April,” Gilani reports. “With Apple’s impact on the Nasdaq 100 now approaching 17% (that’s greater than Google Inc., Amazon.com Inc., and Intel Corp. combined), it’s only a matter of time before another rebalancing takes a bite out of Apple’s influence on this important index.”

Gilani reports, “The problem isn’t that Apple’s share price has been so strong. It’s that investors may be unaware that the Nasdaq 100’s rise and the Nasdaq Composite’s jump to new 10-year highs wouldn’t have been remotely possible without Apple’s 60%+ gain since last summer.”

Read more in the full article here.

[Thanks to MacDailyNews Readers “Michael M., “Sarah,” and “David B.” for the heads up.]

26 Comments

  1. Tried to tell my father 2 years ago or so buy apple stock (around 100 dollars @ the time) now look!!!!!!! Sucks when you want to buy, but just don’t have the money!
    I could be wealthy! F$ck!!!!!!!!!!!!!

    1. I partnered with my father and we bought several, and I made a killing. my 40% cut was enough that I have all the money I’ll need for grad school. That, plus the scholarships I have atm = free degree 😀

      and my father’s 60% cut got him a Nice Audi 😀

        1. Eh, the terms of our parternship had us cashing out. But we have a new partnership 🙂 🙂 🙂 I’m currently doing undergrad studies, so I have some time on my hands before I need those grad school funds – thus, they went right back into AAPL. 🙂

    2. Yes I wish I had bought more too way back in 2000 and could have retired easily today. But at least I can pay off my mortgage or buy 7 or 8 new cars in cash if I wanted to.

      1. Buckminster Fuller (the geodesic domes guy) proposed we replace the term ‘Sunrise’ with ‘Sunsight’ for that very reason. He also suggested ‘Earthclipse’ for ‘Sunset.’ 40 years later, I’m still waiting for this to catch on (and getting weird looks from people when I do speak thusly.)

  2. This is the other side of the coin. The financial analysts have been unable to recognize that a large cap company can also be a growth/R&D company, so they’ve been undervaluing Apple systematically. Now that same same cognitive barrier prevents NASDAQ from confusing size with “stability”. Tremendous growth cannot be considered “stable” in the sense that matters to a stock index.

  3. Suggestions of another rebalancing sort of takes the wind out of the sails of all those who claim Apple’s current share price is just a bubble about to burst.

    I just happened to notice that Apple’s share price is certainly getting closer to Google’s (less than $100 now). I never thought that would happen since I figured Google was easily heading towards $700. A couple of more good quarters for Apple and a couple of weak ones for Google and Apple really could be right next to Google in share price and that would be rather amazing. I sure hope iPhone sales go well in China for a healthy revenue boost to lessen post-Christmas doldrums.

    1. What you are saying, out of context, may be perceived as ignorant (share price is an arbitrary number; market capitalisation is more relevant, and Google’s is significantly lower tha Apple’s). I have impression, though, that you’ve been following the two and have been intimate with the actual share price gyrations of both stocks; while GOOG was always in the mid- hundreds, AAPL was until just a few years ago in double-digits, and to see the prices converge (and eventually cross) seems a bit odd.

      Following the market cap, though, is even more eye-popping. It is still difficult for me to wrap my mind around the fact that AAPL is larger than ANY company out there in the world.

  4. Blogger Adam Nash of Greylock Partners notes that, had Apple been added to the Dow Jones Industrial Average rather than Cisco back in the summer of 2009 when the DJIA was last redefined, the Dow would be up over 2,000 points. Nash noted on Monday that Dow closed at 12,874.04, and had it included Apple rather than Cisco, it would instead be at 14,926.95, 800 points higher than its peak set in April 2008.

    http://blog.adamnash.com/2012/02/13/apple-cisco-dow-15000/

    I don’t know this for a fact, but it might have been better for AAPL if it had been chosen instead of Cisco because the Dow doesn’t have to be rebalanced. Correct?

  5. But the article IS right. When people look at the economy as a whole and make plans and decisions based on the numbers reported, they may be getting the wrong picture and, based on that picture, making wrong decisions.

    Because we have this one company that, in a very poor economic situation, continues to report incredibly fast growth and massive profits, as a statistical outlier, it seriously distorts the actual image of the rest of the industry. We aren’t talking about some five companies, four of them mediocre, one spectacular; we’re talking hundreds of companies with mediocre performance (or worse), and even in such a picture, Apple’s rapid and astonishing growth is still distorting the numbers.

    We’ve seen this before: when Apple’s numbers are backed out of the picture, the actual picture is significantly more troubling. Those who make decisions based on such numbers are essentially getting the wrong picture.

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