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Do investors love Apple just a little too much?
Equities » Few willing to diversify, even though they know profits can’t last forever.
First Published Oct 12 2012 05:59 pm • Last Updated Jan 14 2013 11:32 pm

Every era has its must-own investment. Dot-coms ruled the day in the early 2000s. Everyone had to buy a house to flip in the mid-2000s. And in the ’50s and ’60s, investors couldn’t resist General Electric.

But now there is one stock that’s taken on rock star status and shows up in more portfolios than any other, Apple. Shares of the nation’s most valuable company have dazzled both individual investors and professionals, and loading up on the stock has been one of the best moves they have made.

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Thumbing their noses at aged financial advice preaching for the need to spread money around dozens of investments, or diversify, investors have found that zeroing in on this one company is their ticket to a big Wall Street score. The stock has been a winner despite its recent decline, which briefly pushed it into a 10 percent correction. At its close of $629.7 Friday, it’s still up more than 50 percent this year, which compared with the 15 percent gain in the broad Standard &Poor’s 500 index makes it a runaway winner.

"I don’t want to diversify that much when I have one stock doing just fine," said Matt Loud, a 28-year-old security worker in Bellingham, Wash., who has upward of 38 percent of his retirement accounts in Apple.

Loud is part of a crowd of investors who have become infatuated owners of Apple — and richly rewarded as a result. Just as investors poured into Fidelity’s Magellan mutual fund in the 1980s, Apple stock has become a Wall Street sensation, and investors can’t seem to buy enough of it.

Apple is by far the stock most widely held by individual investors using portfolio-monitoring site SigFig. The extent that shares are owned is head-turning:

• Nearly 17 percent of all individual investors own Apple shares, SigFig says. That’s three times the level of ownership of Google.

• Four times more investors own Apple than the average ownership of the 30 stocks in the Dow Jones industrial average.

• Apple investors, on average, have nearly 17 percent of their portfolios riding on that one stock. And Apple is the top holding of just about every type of investment style there is, including buy-and-hold, active, very active and aggressive investors, SigFig says. Buy-and-hold investors have less than 10 percent annual turnover of their portfolios, while aggressive investors turn over their portfolios completely each year.

• Apple was the No. 1 most-traded stock at top online brokerage TD Ameritrade every day in September except Sept. 19, when it was No. 3.


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A runaway winner • And although piling into just one stock may violate the rules of diversification, it’s hard to argue with performance.

Until the swoon that started in mid-September, shares of Apple had been on such a tear that they made the rest of the stock market look like it was standing still, and that’s despite the stock enjoying a pretty good performance the previous two years. The 57 percent gain in Apple this year comes on top of a 26 percent gain in 2011 and a 52 percent gain in 2010. The S&P 500 was flat in 2011 and up 13 percent in 2010.

With performance like that, it’s hard for investors to understand why they should diversify and dilute what might be their best stock.

Consider Pat Sutter, retired from the Army, who runs various businesses in Surprise, Ariz. Nearly 40 percent of Sutter’s portfolio is in Apple, simply because it’s going up so much faster than anything else he owns. "I know in my heart I have too much Apple," he said. "But because so much of it is profit, it’s not something that concerns me."

Sutter has never bought an Apple product, and prefers mobile devices using Google’s Android operating system. But he bought Apple stock years ago anyway, watching how consumers, including his own family, will buy just about anything with an Apple logo. Apple products "aren’t for me. But I like it when they (family members) upgrade to the next iPhone. I love that."

Meredith Habif, a 35-year-old housewife in the San Francisco area, has already loaded up on more Apple stock. as it now accounts for 75 percent of her overall assets. She says she prefers to follow just a few companies and bought Apple stock when the first iPhone was released in 2007.

Nearly 25 percent of Jim Rodgers’ personal portfolio, and that of his 24-member investment club, is plowed into Apple stock, said the 69-year-old retiree in State College, Pa.

It’s not just individual investors who are enamored with Apple’s stock. The professionals have taken a bite, too. Nearly 20 percent of all U.S. mutual funds, 1,231 of the 6,998, own shares of Apple, making it one of the most widely held issues, Morningstar says.

The professionals, to some degree, are forced to buy Apple stock, said Robert Maltbie of Millennium Asset Management. Apple accounts for 10 percent of the Nasdaq composite index and 5 percent of the S&P 500 index. Investors who don’t own the stock are fighting a headwind that’s difficult, if not impossible, to overcome when they try to keep pace. "If you don’t own it, you almost have to," he said.

Funds that have bet big on Apple, not surprisingly, have been huge winners as a result. For years, the Berkshire Focus mutual fund has had the largest percentage of its total assets in Apple of any mutual fund, Morningstar says. Nearly 24 percent of the mutual fund is invested in Apple stock.

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