One way analysts measure conviction on a particular company is by looking at institutional ownership levels. Morgan Stanley analyst and well-known Apple Inc. (NASDAQ:AAPL) bull Katy Huberty believes the company’s stock could move upward once institutional investors start getting back into it.
Institutional investors cut Apple stakes
Huberty compiled data from 13F filings from the last two quarters and found that the top 100 institutional investors all slashed their positions in Apple Inc. (NASDAQ:AAPL) between the two quarters. In fact, in a report dated May 23, 2014, she states that Apple is the lone large-cap tech company in which ownership by institutional investors is lower than that of the S&P 500.
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The S&P 500 has a weighting of 3.2% institutional ownership. The data shows that as of the end of March, Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB) and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) all had higher weightings of institutional ownership than the S&P 500 did.
Big investors move from growth into value
Huberty cited something many other analysts and investors have noticed recently. She said institutional investors have begun to move from “hyper growth” stocks into “value” plays. The analyst said Microsoft Corporation (NASDAQ:MSFT) and Hewlett-Packard Company (NYSE:HPQ) both benefited from the shift. The portfolio allocations of each of those two companies increased 10 basis points between the fourth quarter of last year and the first quarter of this year.
Apple holders are underweight
According to Huberty, Apple Inc. (NASDAQ:AAPL)’s top holders were “significantly underweight” as of the end of the March quarter. She said that stands apart from how overweight many of them for all the other large-cap technology stocks she follows, including Cisco Systems, Inc. (NASDAQ:CSCO), International Business Machines Corp. (NYSE:IBM), Intel Corporation (NASDAQ:INTC) and others.
Earlier this year, Huberty also noted that institutional ownership of Apple Inc. (NASDAQ:AAPL) was low, in fact, at the lowest level in five years. She reported in February that the top shareholders had 2.2% of their portfolios in Apple. Today’s report indicates that this time around, it’s even lower, as it has fallen by 20 basis points. Meanwhile Apple’s S&P 500 weighting increased to 3.2% from 2.9%.
Apple stock set up well for this year
Of course Huberty continues to see a buying opportunity for Apple Inc. (NASDAQ:AAPL). She maintains her Overweight rating and $69 per share price target on the company’s stock. The analyst believes that with both the low institutional ownership and upcoming iPhone 6, iWatch and potential new service launches this year, shares could move higher.