Why Does This Hedge Fund Hate Apple?

Hedge fund manager Whitney Tilson quit his positions in Apple (NASDAQ:AAPL) during the recent sell-off in the company’s stock and took a loss in doing so, according to the annual investment letter for his fund Kase Capital. Tilson added in the letter that his current largest long position was in Berkshire Hathaway (BRK), with AIG (NYSE:AIG), Howard Hughes (NYSE:HHC), Citigroup (NYSE:C), and Goldman Sachs (NYSE:GS) forming the next four, in that order.

Of the top eight companies he expected to rise, only Apple fell, he said. “Since I took over as sole portfolio manager seven months ago, I have purchased/repurchased only eight stocks, seven of which have risen — and are currently the seven largest positions in the fund (we took a small loss on Apple, which I sold),” Tilson wrote.

Among other hedge funds owning Apple that were hurt by the recent selloff in the company are Raiff Partners, Coatue Management, Csat Investment Advisory, Tiger Global Management, and Greenlight Capital. Overall, hedge funds underperformed the broader market with a 7.3 percent gain to the S&P 500’s 16 percent, the Dow’s 10.2 percent, and the Nasdaq’s 17.6 percent.

Tilson said Kase Fund, known as T2 Partners before he split with Glenn Tongue last year, lost a total of 1.7 percent, and he blamed the weakness on a highly correlated market that made divergences difficult to find. “Managing so many positions spread me too thinly, which had two effects: our fund suffered losses that should have been avoided and, less visibly but perhaps more importantly, the amount of time I spent on shorts impacted my ability to find great longs,” he wrote. Since getting rid of Apple, Tilson’s fund has performed well this year, largely on the basis of the massive rise in Netflix (NASDAQ:NFLX) over the past month.

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