Are These Funds Responsible for Apple’s Fall?

It’s far too early to say for certain what type of investor has contributed the most to Apple’s (NASDAQ:AAPL) recent selloff, but several experts seem to believe that hedge funds and mutual funds may be the biggest culprits. The reason: these big investors stand to gain the most from end-of-year profit-taking and lose the most from the planned onset of higher capital gains taxes of the fiscal cliff.

CHEAT SHEET Analysis: Catalysts for a Stock’s Movement

One of the core components of our CHEAT SHEET investing framework focuses on the factors that could affect a company’s stock. As The Wall Street Journal points out, Apple has been the top stock for a large number of big hedge funds and also became the top holding of mutual funds this year. Sam Katzman of Constellation Wealth Advisors told The WSJ that several “fast money” managers hold positions in Apple. “If you look at the top holdings by leading hedge funds, Apple is at the top or near the top of most lists,” he said. “As 2012 closes, it’s not surprising to see a lot of the fast money crowd getting out to lock in gains.”

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Concerns that the prolonged period of growth in Apple’s stock, which reached its peak with a closing-day high of $702.10 in September, was leading it to go overheated also exist. And these worries have been “exacerbated by the reality of paying higher capital gains taxes,” RiverFront Investment Group’s Sam Turner told The WSJ. But investors who’ve sold the stock for this reason are likely to be back in it by early next year. “This is a good time in our view to use dips to buy Apple,” Turner added. “But over the next one to two months, it could be rather range-bound.”

What’s Next?

Turner is from the don’t-sell side and recommends a long-term view on Apple. “In our view, this is one stock you want to remain patient with since the larger smartphone penetration story is still playing out,” he said. “Apple and Samsung remain the dominant leaders in that space, and we don’t think that’s likely to change in the near-term.”

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