Apple: The Least-Owned Big Tech Stock by Institutional Investors, Morgan Stanley Reports
According to a report from Morgan Stanley, Apple is now the Big Tech stock with the lowest ownership by institutional investors, reaching its highest level of under-ownership since 2008. Analyst Erik Woodring notes that over the past four years, Microsoft held the position of the most under-owned mega-cap stock in institutional portfolios. However, Apple has now taken over that position after the second quarter. Woodring explains that while Apple's active institutional portfolio weighting decreased in the second quarter, its S&P 500 weighting increased, resulting in a significant spread between the two. This shift marks the largest one-quarter increase in Apple's under-ownership in the history of available data.
Concerns and Bright Spots for Apple
Investors have expressed concerns about Apple's stock being overpriced following its significant rally earlier this year. Despite these concerns, Apple shares have seen a nearly 40% increase in 2023, alongside the broader rise in large-cap tech stocks tied to artificial intelligence. According to Morgan Stanley, Apple, Microsoft, Nvidia, Amazon, and Google-parent Alphabet are the most under-owned stocks in actively managed portfolios. However, Woodring highlights positive developments for Apple, such as the recent boost in iPhone and services growth. Woodring also points to the underappreciated gross margin tailwinds and expects the stock to outperform as growth accelerates and consensus estimates rise.
Meta's Over-Owned Status
In contrast to Apple, Meta (formerly Facebook) stands out as one of the most over-owned large-cap tech stocks, reaching its highest ownership level in about 10 years. Woodring remains overweight on Meta due to its focus on efficiency and improving monetization for Reels. The analyst notes that Meta is the only name among the five mega-cap tech stocks where institutional ownership exceeds its S&P 500 weighting.
In conclusion, Apple's under-ownership by institutional investors and its recent surge in stock performance raise questions about its valuation. However, positive developments in iPhone and services growth, along with underappreciated gross margin tailwinds, suggest potential upside for the stock. Meanwhile, Meta's over-owned status reflects its focus on efficiency and monetization. These findings provide valuable insights into the dynamics of institutional ownership in the tech sector.
Implications for New Businesses
The shifting dynamics of institutional ownership in Big Tech stocks, as highlighted by Morgan Stanley's report, offer valuable insights for new businesses, particularly those in the tech sector.
Understanding Market Trends
Apple's under-ownership and Meta's over-ownership underscore the importance of understanding market trends and investor sentiment. For new businesses, this could guide strategic decisions, such as timing of fundraising and valuation expectations.
Investment Opportunities and Challenges
The concerns about Apple's valuation despite its growth and the optimism around Meta despite its high ownership level illustrate the complexities of the investment landscape. New businesses must navigate these complexities, balancing growth potential with investor expectations and market trends.
In conclusion, the dynamics of institutional ownership in Big Tech stocks provide a "hot take" on the investment landscape. New businesses can learn from these trends, using them to inform their strategies and navigate the challenges and opportunities of the market. This underscores the importance of staying informed about market trends and understanding their implications for business strategy and growth.