Apple (AAPL) became the most under-owned mega cap technology stock at the end of the second quarter, according to a Morgan Stanley research note published Wednesday. That positions the stock for further upside, making us even more optimistic on this essential “own it, don’t trade it” Club stock. Behind Apple, the Morgan Stanley report showed, the other most under-owned stocks were Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN) and Google (GOOGL). Meanwhile, the firm said Meta Platform Inc.’s (META) was the most over-owned its been since 2014 when it exited the second quarter, along with Salesforce (CRM) and Oracle (ORCL). The analysts maintained a buy-equivalent rating on each. Morgan Stanley tracked ownership data for 15 large cap tech firms across its coverage, which is based on “each company’s average weight within the top 100 actively managed institutional portfolios relative to that same company’s weighting in the S & P 500.” Ultimately, analysts at Morgan Stanley argued, “on average, stocks appear to experience a technical pull higher when active ownership is much lower than the market, and vice versa.” AAPL YTD mountain Apple (AAPL) year-to-date performance Apple is under-owned The second quarter of calendar year 2023 marked the largest three-month increase in Apple’s under-ownership on record, according to Morgan Stanley. Apple also surpassed Club name Microsoft as the most under-owned mega cap tech stock, which “is a reflection of the significant weighting Apple has in market indices, especially after outperforming the market [year-to-date] by 30 points at the peak in late July,” Morgan Stanley analysts wrote. Apple’s active institutional portfolio weighting last quarter decreased 26 basis points sequentially, to 5.51%. At the same time, the company’s S & P 500 weighting increased 65 basis points quarter-over-quarter, to 7.72%. That, Morgan Stanley analysts said, resulted in the spread between Apple’s S & P 500 weighting and active ownership widening by 91 basis points sequentially, to 2.21%. “Longer-term, we continue to believe the growth of Apple’s installed base and upward pressure on spend per user (potentially catalyzed by a shift to a subscription model) will drive the [lifetime value] of Apple’s installed base higher, which is captured in our $270 bull case valuation,” the analysts argued. META YTD mountain Meta (META) year-to-date performance Meta is over-owned Conversely, the average portfolio concentration of Meta Platforms’ top 100 shareholders increased by roughly 100 basis points, with the social-media giant’s active ownership weighting roughly 60 basis points above its weighting in the S & P 500, according to Morgan Stanley’s research. But analysts at the bank maintained their overweight rating on the Instagram parent company because of its “structural pivot focusing on efficiency and [return on invested capital], improving Reels monetization, positive engagement and monetization trends, and underappreciated call options that could contribute to long-term growth.” The analysts also called out a significant artificial intelligence opportunity with Meta, which they predict could lead to multi-year online advertising growth through more advanced algorithms. Bottom Line We’re long on Apple and Meta regardless of whether these stocks are under- or over-owned. Regarding Apple, “the idea that we should be focused on a quarter that is before a new cycle is ridiculous,” Jim Cramer said Wednesday, noting that Apple is slated to release its new iPhone model in September. That likely catalyst could quickly shift the stock’s status as under-owned. And while being under-owned sets up Apple stock to move higher — a development we would welcome — we’re more focused the company’s huge potential for growth in emerging markets like India and its new product launches, all of which should also pull shares up. Meta, meanwhile, could be over-owned because its valuation is less demanding, revenues have accelerated after a difficult 2022 and the company is managing expenses much better. “Meta [stock] is very inexpensive,” Jim said. (Jim Cramer’s Charitable Trust is long AAPL, META, MSFT, CRM, NVDA, ORCL, AMZN, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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Apple (AAPL) became the most under-owned mega cap technology stock at the end of the second quarter, according to a Morgan Stanley research note published Wednesday. That positions the stock for further upside, making us even more optimistic on this essential “own it, don’t trade it” Club stock.
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