You might not think a stock outperforming the market and considered to have good future prospects would pose a problem for investors, but Reuters reports that it can prove challenging for fund managers.
The issue is that most diversified funds have rules or guidelines that state they shouldn’t hold more than 5-10% of their funds in any one stock. This, fund managers say, can pose three problems. First, there’s the obvious one: they may want to buy more of it than their own rules allow …
John Burnham, manager of the $136 million Burnham Fund, says that he has already stretched a point in allowing AAPL to make up more than 15% of the fund, but would ideally like to buy more.
“I think they are doing everything right and it’s still a cheap stock based on earnings and revenue.”
Others say that the rise in the stock price can mean that they started out below the limit, but a 12% appreciation in the stock value this year has taken them above it. While they are not required to sell when this happens, it means they end up in a position they didn’t intend to take: where the movement of a single stock can have a significant impact on the fund as a whole.
David Chiueh, the manager of the Upright Growth fund, has 13.4 percent in Apple, the second-largest among diversified funds tracked by Lipper, mostly because shares he bought in 2008 have appreciated, he said.
Yet others are torn between following their usual practice–selling stock to take the profit when it reaches 7% of their portfolio–and holding onto it in the expectation of further growth.
Burnham is unsurprisingly bullish about AAPL’s future: he first invested in AAPL when the stock had a split-adjusted value of less than $7; those shares are today worth more than $123.
“It’s the world’s greatest company. I just don’t see any reason to sell it,” Burnham said, adding that he thinks that the stock should trade above $200 a share.
Fund managers will be eagerly awaiting early sales figures for the Apple Watch, and of course hoping to learn a lot more about what plans the company may have for an Apple Car. Apple is also set to replace AT&T on the Dow Jones Industrial Average at the end of trading on Wednesday.
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As a retirement stock, that was purchased at a much lower cost than its current value, I’m always torn as to when / if “to sell.” When it hit the high in 2013 ($700+) my wife wanted to sell but I wanted to hold on. When it stumbled and took the dive, she would occasionally drop the “I told you so” comment. But since the split and growth, she’s remained silent.
I think my sell point – now that I’m so much closer to retirement – will be IF it hits the $150 to $175 share price. As much as I believe in Apple – I want to fund my / our retirement.
YMMV!
That’s the conundrum right there for a lot of people. At this point I don’t hold a significant enough position in AAPL where cashing out makes sense, so it’s a little easier to keep riding.
Oops, @torovolt
Wow. I am not trolling that is my personal opinion and I have been following Apple for a long time and own several Apple products.
We can have a civilized discussion item by item if you want but please no name calling.
@Torovolt had it not been for the initial statement “when i switched to android” i would have considered what you were saying. i thought hmm maybe he has some interesting points; however as someone who has had the Android OS and interacts with it on a daily basis (as my parents are always calling me because they’re CONSTANTLY having issues) there is NO other operating system as smooth and reliable as iOS. Apple may have issues now, but they realize their problems; It may not always be right away, but they are always addressed. I haven’t seen any of the android OS issues even acknowledged or resolved. Apple isn’t the best at everything, but they are constantly getting better. The iPhone wasn’t perfect in the beginning, but it damn sure is close now. Maps will improve, their OS will improve, their product line will improve. The aim to be the best in what ever category they enter, that’s why they are where they are now. Apple is crossing into different markets and that announcement has people nervous and pushing to get better. Android didn’t enter the watch market until there was rumors of an apple watch. look at the leaders and look at the followers. Apples product line is only getting better. its better to try and fail then to not try at all.
I can write an extensive reply to you here, but I’m afraid it will be deleted so I am not wasting my time.
Last week I wrote an absolute measurable fact about battery life and gave the appropriate reference link to the website that have the metrics. It was deleted because it showed the iPhone 6+ at 60th place in battery range. I guess I’m a fool by wasting my time in a fan site. I thought this was a serious publication. guess not. lol
Usually , battery is only concerned when it lasts less than 1 day. Otherwise, who really cares. You charge your android phone 2x a week, i do my 6+ 3x a week, so what?
i enjoyed your post. i didn’t agree with it, but enjoyed it non the less as it showed a different perspective. i didn’t see any issue in it for it to be deleted.
Thank you