By Ian Salisbury
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Mutual-fund investors aren’t supposed to have to pay attention to the fate of any particular stock. But like so many things with technology giant Apple Inc., the regular rules don’t seem to apply.
While Apple’s /zigman2/quotes/202934861/composite AAPL +2.85% stock has been hit hard in recent months — losing more than third of its value since September, including a 12% drop since missing earnings estimates on Wednesday — the Cupertino, Calif.-based company is still the most valuable name on the stock market. That distinction means it looms unusually large in millions of Americans’ investment portfolios, even if they’ve never glanced at one of its quarterly earnings reports. “We’ve never seen another company have as big an impact” on overall market returns, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
Just how popular has Apple become? It was among the top 10 holdings in more than 1,000 mutual funds last year, according to fund researcher Morningstar Inc. — up from just 11 in 2002, shortly after Apple introduced the device that started the gadget craze, the iPod. Overall, about one in four stock funds owns Apple. See Apple’s slide catches many funds. Is yours one?
To be sure, that partly reflects Apple’s popularity with index funds. These vehicles — like Vanguard Total Stock Market /zigman2/quotes/202876707/realtime VTSMX -0.31% , which owned more than $6 billion of Apple shares at Dec. 31—merely buy stocks based on their market values. For those funds, Apple is automatically their largest holding.
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But many prominent actively managed funds, including Fidelity Contrafund /zigman2/quotes/202430342/realtime FCNTX -1.17% —Apple made up 8.2% of its portfolio as of its most recently published figures — and T. Rowe Price Blue Chip Growth /zigman2/quotes/208533233/realtime TRBCX -1.27% — 8.6% — are also big fans. While both those names have strong long-term track records, some fund managers were likely tempted to hold big stakes for the wrong reasons, according to experts. “You want to show you own a successful stock,” says Lipper analyst Jeff Tjornehoj. “It’s not easy to get rid of.” (A tool like Morningstar’s Instant X-Ray can tell you how much Apple you hold via your funds.) See Morningstar’s Instant X-Ray
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Now investors that rode the Apple bandwagon — and frankly everyone else too — is feeling the stock’s reverberation. The S&P 500 was up 13.8% last year. Apple, which at its peak amounted for about 5% of the index, added roughly a percentage point to that gain, according to S&P. Today the index was flat in early afternoon trading, and for the year so far it’s up 4.8%, but would have risen nearly 5.7% without Apple’s drag.
Sliverblatt says the only stocks in his memory to take up such a big slice of the index were IBM and the old AT&T in the early 1980s, although he doesn’t remember their price swings having as big an impact on returns. “I didn’t see anything like this,” he say.