Considering that their stock just broke the $700 billion barrier, you could be forgiven for not believing that selling off Apple stock would be a good idea. That’s exactly what one of the biggest, and most well-respected, pension fund companies just did however, when Bridgewater Associates recently revealed that they had cut their holdings with Apple by roughly 50% in the last quarter of 2014.
Led by Raymond Thomas Dalio, Bridgewater Associates picked up Microsoft as a replacement, something that was a big surprise to many analysts. At one point near the end of the 3rd quarter of 2014, the hedge fund held $53.9 million with Apple, but today that’s down to $28.6 million. During the same time period, their holdings in Microsoft went from $679,000 to just under $20 million, a 4000% increase.
The main question that most in the industry are asking is simply this; why? The answer points to a number of analysts who, for quite a bit of time now, have been warning that it’s no longer a good idea to purchase Apple stock. Right now Apple’s shares are trading at a needle busting valuation of 17 times diluted earnings per share, unheard of for a tech hardware company of their size. You also have many investors saying that the tech giant is on a path to become the first $1 trillion dollar company in US history. Many question whether dumping them was a good idea considering these facts.
So far the trade hasn’t actually been going as well as Bridgewater Associates had planned. The biggest reason is that, with an amazing fourth quarter that saw record numbers of iPhone 6’s being sold, Apple’s shares have been melting up considerably. At the same time, investors have realized that the shift Microsoft is making into faster growing areas is one that will most likely take quite a bit longer than was expected.
What makes Bridgewater’s move even more newsworthy is that, from all appearances, they’re voting with their wallet. Hedge funds typically have “deep pockets” and can make the types of moves that are sometimes contrary to the masses because of those pockets. Going against Apple right now doesn’t seem like a smart move, especially when most Wall Street analysts would never think of doubting apples nonstop stock climb, but Bridgewater has the financial stability to do it, and do it they have.
Bridgewater Associates obviously see something that others don’t, and is betting that Microsoft offers a better opportunity. While it’s true that a stock can’t go on climbing higher forever, the fact is that Apple is one of the most widely held stocks among hedge funds. Even with phones and cell phone plans that are much higher than companies with similar capabilities and phones, Apple keeps selling a ton of product. Indeed, the US has never seen the likes of the company with profits this high. In short, time will tell whether Bridgwater’s move was the smart one.