Apple stock fell victim to index funds

“Trading can be an emotional roller-coaster, but trading or investing Apple stock goes beyond emotional and enters into the realm of psychotic,” Ernie Varitimos writes for TheStreet. “Fortunately the selling appears to have subsided, and Apple may have found a bottom at $390; currently, it’s trading about $20 above that low.”

“This kind of volatility drives traders and investors mad trying to guess which way the stock will go next,” Varitimos writes. “Should they wait, add more, protect gains, get in, get out? There are countless permabull retail traders (little guys) that have been dumbfounded. Many bailed when it got below $400 because they couldn’t take it any longer. Now, they’re kicking themselves as Apple rebounds.”

“But it’s not Cook’s fault. It was really the result of index funds being overloaded with Apple shares, and they rode it all the way to the top, making huge profits. Then some of the bigger funds, along with a swath of insiders, decided to take profits, which is natural, but it manifested into a slippery slope, which caused a cascade of funds to divest, and they kept on divesting,” Varitimos writes. “This was exacerbated by a confluence of things that mainly resulted in confusion and fear. Analysts smelled the fear, and so they jumped into action and used their superior intellect to explain to investors what was happening. And because they are analysts — hapless, glorified reporters — they mostly got it wrong, which did nothing but add to the fear, uncertainty and doubt (FUD). At the same time, also sensing an opportunity, Samsung jumped into action with a massive Apple smear campaign, which helped them sell a lot of cheap Galaxy phones and ‘phablets.'”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Tamir C.” for the heads up.]

Related articles:
Put emotions aside and buy Apple, here’s why – April 25, 2013
Cody Willard: How Apple can get to $900 – April 25, 2013
Apple to tap a hungry debt market; strong demand likely from investors eager to get cash off sidelines – April 25, 2013
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013


    1. perhaps true,

      but what I disagree with is Samsung Galaxy Phones like
      the S2, S3 and S4 are definitely not cheap to buy phones.

      At 699.99 on a three year contract – they are a very poor plastic alternative to a superior Apple iPhone. Extremely expensive junk that “Ice-creamed” the consumer.

      the Android Tablets from every manufacturers such as Acer, HP and Samsung have sold extremely poorly at start – a reduction of 50% in price was the reason that spurred sales.

      Galaxy Ace and Galaxy mini are completely low costing, non-upgradable, dead-end, totally cheap give aways — running Frodo 2.2.3 – cell phones to be trashed… I can not imagine these phone made any marginal advancement in Samsungs’ profits.

      1. I was in Staples today and they’re also selling the Galaxy S3 for $50 on contract. With that big display, I’m sure it would attract plenty of 2nd tier buyers. It definitely looks to be worth $50 (meaning a bargain at $50) even if it is last year’s smartphone. Most consumers won’t care if it’s made of cardboard and crashes every day at that price.

    2. I have been saying it for weeks…the money trail of these bullshit “analyst reports” goes back to Seoul and Redmond.
      Maybe we should that little maniac north of demilitarized zone repurpose Samsung. Apple is one of the few very healthy electronics companies on the planet during this world wide recession; it made no-sense that they were receiving so many negative “financial outlooks”.

  1. Bottom line:

    “It increases the value of Apple stock, which creates demand. It positions Apple as a more mature, value-oriented company that will entice index funds to reinvest. It rewards faithful long-term investors and a whole new group of value-oriented investors. It quells the incessant nagging of many analysts that Apple is hoarding cash, and it generally creates a lot of good will.”

  2. Varitimos seems to have a tenuous grasp of how index funds are managed. They follow the proportional mix of stocks represented by the market at large for that index (S&P 500 is about x % Company A and y % Company B, up through Company SF). The fund doesn’t make as much money as possible using any mix of stocks that look good at the moment. It matches the mix of the S&P 500. Day traders and hedge fund managers are the players in this casino. Legit no-load index funds are the little guys only hope.

    1. You are right about index funds. But lots of funds held Apple, and some of them were heavily overweight in the stock. The last time that I checked, institutional investors held about 70% of AAPL. Therefore, only the institutional investors could have generated sufficient sell-side pressure to tank AAPL as far as it fell in seven months.

    2. The problem is TheStreet changed the headline from what I originally submitted, which is running on my website, called “Apple Investors Are Emotionally Drained”

      I know it’s hedge funds, and I didn’t indeed it to sound like it was index funds leading the divesture, however they did contribute.

      1. I agree that index funds had to sell AAPL to reflect the changing valuation as the hedge funds dumped AAPL and the players in the casino took whatever manipulative actions that suit them.

  3. ridiculous.
    Apple may be a victim to hedge funds, but not index funds.
    AAPL has underperformed most index funds for 8 months now.

    On the other hand, if Cook could have seen fit to announce iWork 2013, or a new Mac Pro, or a family of iPhones, retina displays across the entire Mac range (including those displays that haven’t seen an update in several years), a concerted effort for growing Apple’s exposure in foreign markets or enterprises, or even a decent update of iTunes in the first half of this calendar year, then guess what!
    Not only would this quarter’s earnings call been a smashing success, but nobody would be talking Cook into blowing Apple’s cash to satiate Wall St; media, public, and analysts would be be singing praises about Apple innovation and, better still, planning new purchases of Apple hardware instead of the cheaper knockoff crap from the imitators, and best of all: Apple’s earnings would improve for the last half of 2013.

    Instead, Cook is playing lackey to hedge fund managers and slowing down Apple’s product introductions. That is why most analysts and the Apple community is disappointed. But don’t expect Wall Street to boost Apple stock price. They have predicted (correctly, I might add) that Cook is “maturing” the company, turning Apple into a slow, plodding corporation that exists primarily to service Wall Street. As such, Apple will now issue dividends, not a spectacular string of exciting new products. And AAPL stock price will now track the same trajectory as MSFT, since its new product introductions are as slow an uninspriring as Redmond’s.

    Let’s compare the pace (NOT quality) of product release, shall we?
    Tim Cook gave us:
    – an overpriced lightning connector that doesn’t work with any legacy accessories you own
    – a MacBook Pro with a new screen but regression in other areas
    – a smaller iPad with poor profit margin that is undercutting iPad sales big time
    – a late, relatively poorly configured iMac
    – a downgraded iTunes
    – Maps beta
    – continually dumbed-down Mac OS releases
    – an “iCloud” useful only for media syncing

    What has Redmond offered?
    – families of smartphones with a relatively decent OS (albeit no ecosystem to justify their purchase)
    – two new (disastrous) hybrid OSes that mingle the worst of touchscreen and desktop machine
    – two new noisy clicking tablets that are too expensive to garner much market share
    – significant gains in Kinect developer’s kit and promises of a new xBox for dunderheads that have no social life
    – several updated, albeit not improved, versions of Office and various other enterprise software and services
    – a useless, albeit enterprise-tailored “cloud” that will force the rent-a-software model

    With all due respect, Cook: the only reason Apple’s slow pace of product update is acceptable is because Microsoft’s is crappy and Ballmer wouldn’t know user-friendly products if an iPad was crammed up his wide derriere. But Microsoft in the last couple years has been MUCH more prolific, Cook. And that’s why MSFT is stable while AAPL stock has lost >$300 billion in valuation. Constant new product releases — even crappy Microsoft product releases — can do wonders for keeping investors valuing the future prospects of a company. Get a clue, Cook. The world doesn’t want Apple to be so !@#$%^ slow with its pace of new products.

    If Cook is really working on something insanely great, then he missed his opportunity to save Apple’s valuation by keeping Apple the foremost innovator instead of just another plodding corporation.

  4. Cognitive neuropsychology shows that the human mind focuses on simple numbers, such as 400. Lesser numbers, like 398, are read as sinking. Numbers like 408 are still unsteady, but 411 promises higher hopes. Past 451, the mind seeks 500. The Stock Market can only respond to what our lizard brains can perceive.

  5. Agreed.

    And why the heck is it phablet and not phonelet?
    Anyway. Goosungs’s phones remind me of Microsoft’s Big Ass Table. Go and look it up on YouTube if you haven’t seen it.

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