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Apple, Amazon Lost Some Institutional Holders in Late 2018 Rout

Institutional ownership of large-capitalization technology and Internet stocks fell in the fourth quarter.

Apple, Amazon Lost Some Institutional Holders in Late 2018 Rout
Customers wait for assistance at the Apple Inc. Williamsburg store in the Brooklyn borough of New York, U.S. (Photographer: Mark Kauzlarich/Bloomberg)

(Bloomberg) -- Institutional ownership of large-capitalization technology and Internet stocks fell in the fourth quarter, with the average portfolio reducing its allocation to the sector amid a sharp decline in share prices.

According to Morgan Stanley, ownership for the group fell in the December quarter to its lowest level since the second quarter of 2017, with institutions modestly lowering their exposure to Apple, Amazon.com and Facebook, along with Oracle and IBM. This more than offset higher ownership of names like Microsoft, Google-parent Alphabet and Qualcomm, according to the investment bank.

The fourth quarter was brutal for many tech bellwethers. Apple shares shed more than 30 percent over the period, while Amazon fell 25 percent; it was the worst quarterly performance for both stocks since 2008. Facebook lost 20 percent in the final three months of 2018, its biggest quarterly percentage loss since 2012.

Apple, Amazon Lost Some Institutional Holders in Late 2018 Rout

Ownership of Apple fell 50 basis points on a quarter-over-quarter basis, dropping to 2.4 percent, “the lowest level of institutional ownership since C2Q17,” Morgan Stanley analysts led by Katy Huberty wrote to clients. This was the largest quarter-over-quarter decline since the fourth quarter of 2012.

At the same time, Apple’s weighting in the S&P 500 fell by 80 basis points to 3.4 percent, Huberty wrote, “implying the spread between Apple’s S&P weighting and ownership levels (96bps) contracted to less than 1 percent for the first time since 2016.” The share-price losses in the quarter resulted in Apple losing its status as the most valuable stock on Wall Street, although it has regained it for brief periods.

“A number of factors led investors to take profits or reduce positions” in Apple, Morgan Stanley wrote, citing “multiple iPhone suppliers cutting guidance,” “elevated US/China trade tensions and concerns around macro uncertainty,” and unfavorable court rulings in the company’s dispute with Qualcomm.

Morgan Stanley, which has an overweight rating and $197 price target on Apple, wrote that “investor sentiment/positioning became overly negative” in the quarter, and that it expects a year-to-date rebound in the stock “will be reflected in institutional ownership levels exiting the March quarter.”

Read more: Apple’s Sales Weakness in China Likely to Persist, HSBC Warns

Ownership of Amazon fell 30 basis points in the quarter, per the firm’s data, while Facebook’s was down 10 basis points. Both stocks have also seen rebounds in 2019.

Among the names that saw increased favor in the quarter, ownership for Alphabet rose 10 basis points on a sequential basis, while Microsoft’s ownership rose slightly, bringing its institutional ownership weighting to about 3 percent, “still below its S&P 500 index weighting,” Morgan Stanley wrote.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

©2019 Bloomberg L.P.