Business
Investors Roll The Dice As Apple’s Value Booms
The world’s most valuable company has turned into a bit of a casino stock.
Since Apple Inc on February 29 became only the sixth company in U.S. history to top $500 billion in market capitalisation, trading has become more volatile, indicating that more investors are tracking headlines and looking for quick gains.
Apple has gained 32 percent since the beginning of the year, outstripping its gains for all of 2011. It accounts for more than 4 percent of the weight of the S&P 500 index, a kind of outsized standing that has caused its moves to dictate market direction on a daily basis.
That’s a trend that is causing consternation among some players in the market. They note that other companies that had become members of the elite $500 billion club not only couldn’t sustain their standing, but weighed on the entire market as they fell, Reuters report.
For long-term investors, the stock of the iPad and iPod maker has been a winner, the ultimate in buying and holding. From a short-term basis, buyers have gotten much more fickle.
“Apple has become a favorite daytime trading stock for short-term traders. It’s one of the rare stocks that have momentum followers and that move on headlines that are not related to earnings,” said David Rolfe, chief investment officer at Wedgewood Partners in St. Louis, Missouri. The firm manages $1.5 billion in assets and owns Apple shares.
Intraday swings in Apple are at the most volatile levels since October last year. The swings have averaged around $12 a day for the past two weeks, compared with about $14 in October.
On Monday, Apple shares plunged 3.1 percent in about 10 minutes around 11 a.m., which pushed the company’s market cap below that $500 billion threshold. Trading volume spiked during the drop to almost 3.8 million shares, the heaviest 10 minutes of turnover since February 15, when the stock’s shift in direction pulled the market with it.
Apple shares typically run up in the days ahead of a major product launch, but the shares have gained sharply this year, in part on anticipation over a new generation of its popular iPad tablet.
The new iPad 3 – which is expected to offer a better screen, camera, processor and 4G wireless capabilities for the same price – is to be unveiled on Wednesday. Any major disappointment may weigh on the shares.
For Apple, a share price of $537.54 marks the level that pushes it above a market cap of $500 billion.
There are concerns that Apple, because of its size, will start to hurt the overall market should the euphoric trading that pushed it to a record high of $548.21 on March 1 subside.
“We used to say ‘if GE goes, then the whole country goes.’ Now we say ‘if Apple goes, the whole country goes,’” Rolfe said.
Apple joins only a handful of companies – Microsoft, Exxon Mobil Corp, Cisco, Intel and General Electric – that have crossed the $500 billion mark. None of those other stocks was able to sustain that value.
“How the others – and equities in general – performed after hitting that threshold wasn’t good,” Jason Goepfert, president of SentimenTrader.com, said in a report last week.
As Apple shares dipped on Monday, activity in the options market picked up, ranging from investors hedging their long positions in the stock to betting on a rebound.
“Short-term implied volatility for weekly options that expire this Friday jumped more than 10 percent as nervous investors bought options to hedge positions,” said Tim Biggam, options strategist at options trading firm TradingBlock in Chicago. Implied volatility measures the expected magnitude of share price movement conveyed by option prices.
“There was a mad rush for out-of-the money puts mostly congregated in the $520 to $530 range expiring this Friday and on March 16 for standard one-month options,” he said.
Despite the high price, Apple look like a value stock. It trades at 15 times earnings, close to the 14 earnings multiple of the broad S&P 500 index, even though its earnings per share grew nearly 83 percent last year, nearly four times that of the broad index.
In February, Apple shares have moved than 1 percent up or down on a single day in 12 sessions.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
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