Hedge funds responsible for Apple stock decline

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Some of the biggest hedge funds that helped make Apple Inc a stock market darling lost faith and dumped their stakes in the fourth quarter, fueling the massive drop in the iPhone maker’s share price.

Noted stock pickers including Leon Cooperman and Thomas Steyer unloaded billions of dollars of Apple shares between Sept. 30 and Dec. 31, according to disclosure documents filed on Thursday.



  • dr.no

    Rich people were selling their gains because the capital gain tax are suppose to go up and they were smart to sell to save money. Most of the Apple executives were also selling for the same reason.

    If new suckers don’t come in buy and bid up shares obviously the stock is going to go down. Since 2008, it is the Fed and Hedge Funds inflating the stock market otherwise it would worse than depression on 30s. It is economy of illusion.

    • Walt French

      Your argument doesn’t support the characterizations of buyers as suckers. Somebody who had big gains could have sold their shares simply to catch the lower rate, thinking they might want to sell sometime in the near future for other reasons — say, to buy a retirement home.

      Has nothing to do with whether buying shares was a sucker’s bet or not.

      I DO agree that the Fed has helped keep us from a morbid depression, and that rebounded stock prices are due in part to that. But note that companies are earning lots of money, lots of it from overseas. There’s at least a shred of reality in the markets.

  • Byrn

    exactly

  • http://twitter.com/jackbanh Jack

    Wise move, the stock had its huge $700 peak in mid-Sep.

  • Walt French

    Hedge funds exist for the sole purpose of making money for their clients owner/managers. They use customers’ assets to leverage their own talents, which supposedly include a savvy sense of when to buy and when to sell.

    No reason to think that they, any more or less than any other investor, is interested in Apple’s products or culture or anything except the profits they can make. Also to note: when I buy a share, it’s from somebody else who’s selling (and vice-versa). Trading is the exact opposite of a club of people with identical interests.

    Now as to the claimed loss of faith in Apple, that would not be loss of faith in the sales, leadership, product quality or any other feature besides other investors’ perceptions of the future stock price. (See Wikipedia’s Keynesian Beauty Contest for details.) It hardly matters whether they believe Apple’s December quarter sales would be weak; all that matters was whether other investors would be worried—rationality be damned. I kinda doubt any loss in confidence in the company’s fundamental strengths—good investors don’t discover the management are idiots within weeks or months of finding them geniuses—but mostly, it’s irrelevant.

    A final point—one that market types might actually like to discuss, so look for big questions here: if a couple of hedgies drove the price down when they sold, what happened when they bought in? Did their purchases actually push the share price up to what turned out to be a top? Is there some good reason people happily sold the hedgies their shares at a cheap price, but then bought them back at a higher price when it was skidding?

    Finally, if buying drives up a price, it usually does so by forcing the buyer to pay a higher price; conversely a big seller has to give a discount to get buyers interested in taking on a lot of shares where the seller might have some news suggesting worse is to come. The argument above is simple enough that it wouldn’t be inconsistent with the hedgies having overpaid to accumulate the positions they had on 9/30, and/or sold cheap on the way out, in a way that actually cost them a boatload.

    I wouldn’t think that, but mostly in scratching around I’ve seen a lot of “conspiracy theory”-class assertions backed by zero, or lightweight evidence. This post at least gets to what I imagine the root cause of the price decline: that some, maybe many investors thought Apple’s share price prospects were not as good as earlier.

    Obligatory disclaimer: I’m not pretending that this analysis AT ALL suggests whether prospects are particularly good or bad for the share price going forward. Just trying to say that I think the recent bounciness is perfectly consistent with what I see of other high growth stocks, where small differences in future prospects can make a big price change.

  • Bernhard Grabowski

    Hedge funds are as responsible for the stock price decline as they are responsible for the steep incline before that. The normalized outcome is be basically zero, a bit skewed to the negative side due to perceived sentiment by the trampling herd of media. I didn’t see a “hedge funds responsible for the rise of Apple” article here. When things go well, it’s all the perceived sole responsibility of Apple. If not, blame the investors, pick the most fashionable group to hate. In fact, Apple is a very awesome company and the stock movements can be very detached from that. Right now I feel more comfortable owning it forward than in September.

  • http://www.facebook.com/amber.reimers.3 Amber Reimers

    Predicting the stock market like that can be pretty tricky, but they actually have software and services now that can tell you (with pretty good accuracy) which stocks you should select. I’ve tried a lot of them but the best one I’ve used is called Trading Pro System. It’s a service that gives you advice on which options are the most profitable, and whether you should buy, sell, hold, etc. It is run by a team of market experts using software to analyze the market. In my experience, it’s been correct most of the time. If anyone’s interested, here’s a review: http://stockmarketsystems.org/wp/trading-pro-system/