Apple Inc. supplanted Microsoft Corp. last quarter as the most “under-owned” large technology stock among big institutional investors, according to Morgan Stanley, and history suggests that could be a positive indicator for the consumer-electronics giant’s stock.
“[S]tocks appear to experience a technical pull higher when active ownership is much lower than the market, and vice versa,” Morgan Stanley analysts wrote in a note to clients earlier this week.
The team at Morgan Stanley looked at the ownership of 15 large tech stocks, their average weight in the top 100 activity managed institutional portfolios, and their relative weighting in the S&P 500
SPX.
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“A quant analysis of this historical ownership data indicates that on average, after adjusting for market cap and earnings beats, there is a statistically significant relationship between low active ownership relative to the S&P 500 and future stock performance,” the analysts said.
Microsoft
MSFT,
had been the most under-owned big tech stock for four years, but Apple
AAPL,
claimed that title in the latest analysis, based on second-quarter data. The second-quarter brought the largest single-quarter increase in Apple’s under-ownership levels since Morgan Stanley began tracking these trends.
“We believe this 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, as well as investor concerns about the divergence between valuation…and near-term fundamentals,” the analysts wrote.
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They noted that Apple’s price-to-earnings multiple peaked at 29-times calendar 2024 estimates in July, but the company’s forecast implied the potential for a fourth straight quarter of declining revenue on a year-over-year basis.
On the flip side, Meta Platforms Inc.’s stock
META,
became the most “over-owned” that it’s been since 2014, according to the Morgan Stanley analysis. It’s the only stock of the five mega-cap tech players whose institutional ownership in the second quarter exceeded its weighting in the S&P 500.
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