When Apple stock rallies, its unprecedented market weight creates headaches for stock managers because, basically, they never own enough of it. That dynamic played out starkly once again in the third quarter.
Only 27% of large-cap mutual funds beat their benchmarks in the span, the poorest showing for any third quarter since Bank of America Corp. began tracking the data in 1991. While other factors contributed to the dismal performance, strategists including Savita Subramanian highlighted underexposure to Apple as a key culprit.
Either by choice or regulatory strictures, not many active funds are positioned to maximize Apple’s gains. Among some 200 equity funds that are benchmarked to the S&P 500 and have at least $500 million in assets, four-fifths held fewer Apple shares than the company’s 6.6% representation in the benchmark, data compiled by Bloomberg show. These funds returned 7.1% over the past three months, trailing the market by 1.3 percentage points.
Interestingly, when Apple’s hegemony eases, fund managers do better. When the shares reversed ground and fell 10% last month, the percentage of fund managers beating their benchmark surged to 60%, BofA data showed. As the economy recovers, market participation is likely to broaden, boding well for stock pickers, according to Subramanian.
MacDailyNews Take: Apple is the only stock that matters for many individual investors, too.