Apple Earnings Have ETF Fans on Alert With $58 Billion at Stake

(Bloomberg) -- Exchange-traded fund investors have about $58 billion riding on Apple Inc. ahead of earnings on Tuesday afternoon.

Shares of the iPhone maker are the second-largest aggregate holding across all U.S.-listed ETFs after Microsoft Corp., in which ETFs own $70 billion of stock, according to a recent report from Bank of America Corp. But while 241 funds own the Cupertino, California-based company, exposure is quite concentrated, with five funds accounting for more than half of Apple holdings.

It’s a timely reminder that it pays to understand the specifics of a fund’s portfolio. Broader funds have outperformed Apple during the last 12 months, as the company struggles with weak demand for the iPhone and, in January, cut its revenue outlook for the first time in almost two decades. Its shares have rallied about 47% since then but are still trading about 10% below October’s record high.

However, Bank of America has a positive outlook on Apple ahead of earnings. Strategists led by Mary Ann Bartels favor the $22.3 billion Technology Select Sector SPDR Fund, or XLK, which has almost 17% of its assets in Apple, over the $2.5 billion First Trust Technology AlphaDEX Fund, or FXL, which has only 0.3% of exposure.

There’s also a “fairly cyclical pattern to recent relative performance between these ETFs that we believe currently favors XLK,” Bartels wrote in a research note dated July 23.

--With assistance from Tom Lagerman.

To contact the reporter on this story: Carolina Wilson in New York City at cwilson166@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Catherine Larkin, Rachel Evans

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