Funds are Selling Apple Hard in 2015: A Contrarian Play?
Activist Investor Carl Icahn: Apple is Highly Undervalued
Hedge funds sell Apple, yet Icahn holds on
Although hedge funds have been selling Apple much more than they have been buying it, activist investor Carl Icahn maintained his holdings in technology sector stocks. These stocks include Apple (AAPL), Nuance Communications (NUAN), and Mentor Graphics (MENT). Together, stocks in the technology industry sector amounted to $7 billion, representing 22% of Icahn’s 4Q14 portfolio.
AAPL forms 18% of the Technology Select Sector SPDR Fund (XLK). According to aggregated 13F data for 1Q15, notable funds selling their entire positions in Apple are AQR Capital Management and Citadel. Asset managers such as Bank of New York Mellon (BK), UBS, and GE have also sold out completely. What is interesting, however, is that Apple continues to outperform its benchmarks and may continue to do according to Icahn’s reasoning and strategy.
Technology and top holdings compared against benchmarks
As the above table shows, technology stocks held by Carl Icahn significantly outperformed the benchmark sector fund, the Technology Select Sector SPDR Fund (XLK). However, other top holdings held by Icahn (aside from Apple), namely CVR Energy (CVI) and eBay (EBAY), underperformed their respective benchmark ETFs.
Returns comparison: AAPL versus the S&P 500
The chart below clearly shows that historically, Apple has outperformed the S&P 500 in terms of monthly returns. The exception to this performance trend includes short timeframes during the financial crisis of 2007–2008, when the stock massively underperformed the S&P 500. For the most part, the company has outperformed the S&P 500.
The next part of this series provides an in-depth look at Carl Icahn’s Apple holdings.
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