Apple is Everywhere

January 28th, 2011
by Jonathan Leidy

It’s official. Apple is everywhere… in our homes, our offices, our pockets and purses, and for some diehard supporters, even in their hearts. Over the past decade, the much beloved computer company has single-handedly reshaped the personal device market with an onslaught of everything “i,” from desktops to laptops, tablets to telephones, and the list goes on. In fact, Apple is so ubiquitous, an estimated 1-in-5 US households uses at least one of their game-changing gadgets1.

One place, however, where many people may not think to look for Apple is in their investment portfolio. Obviously those investors who have made outright purchase of Apple stock (AAPL) are not shocked to find it there. But even if you have never bought a single share of the Cupertino-based company, chances are you own it… and in some cases, in meaningful proportions.

According to a recent Wall Street Journal Online article, over 4,100 mutual funds own AAPL as one of their holdings. To offer some perspective, there were 7,691 mutual funds traded nationally at the close of 20092. That means that roughly 53% of all publicly-traded funds own a slice of “Apple pie.” If we then adjust the total number of funds to exclude bond funds and money markets, we find that Apple is held in just over 80% of all equity funds.

Based on the undeniable popularity of their products, it may seem reasonable to some for Apple to appear in so many funds. After all, at $314B, it is one of the largest companies in the country, second only to Exxon Mobil. Yet it is not just the omnipresence of the stock, but the concentration of it in certain funds, ETFs and indexes, that is surprising3:

This pervasiveness and concentration can lead to significant overlap in an investor’s portfolio. Take the following example of an individual whose portfolio is comprised of 60% SPY, 20% FCNTX, 15% QQQQ, and 5% in AAPL directly. This individual may feel reasonably diversified. Yet, he or she, perhaps unwittingly, has a portfolio with over 11% invested in a single, growth-oriented company.

The message to investors is clear: even when you think you are reasonably diversified, you may not be. Moreover, despite the fact that Apple keeps cranking out earnings by the bushel, whenever the bar for a company is continually set higher and higher, missteps become more likely. And with so many funds taking positions in the company, a reversal of sentiment could end up being a very large worm in what has otherwise been a very sweet snack for investors.

1Extrapolated from the number of US HH using smartphones, Macs, and iPods (with a 50% adjustment for multiple device usage in a single HH), taken as a percentage of the total HH in America (114.8MM according to the 2010 US Census estimate).
22010 ICI Investment Company Fact Book (Tables 1 & 5), .
3Wall St. Journal Online, “Chances Are, You are an Apple Shareholder,” Brett Arends.  Jan 23, 2011. .