Apple news impacts hedge funds, heavy investors

Date: Wednesday, January 19, 2011
Author: Svea Herbst-Bayliss, Reuters

Few CEOs have been linked as closely to their companies as Steve Jobs is with Apple Inc and few U.S. companies are as popular with investors as Apple is with hedge fund managers.

Analysts have called Apple the $1.7 trillion hedge fund industry's most popular stock. Many of the world's most successful hedge fund operators, from Stephen Mandel to James Simons to David Einhorn, boasted sizable positions in the stock at the end of the third quarter.

So when Jobs, who grew Apple into the world's most valuable technology company by masterminding products like the iPod, iPhone and Mac computer, told the world he is taking another medical leave of absence, the news likely hit hedge funds especially hard.

Jobs' leave came nearly two years after he took a six-month break to undergo a liver transplant. He also was treated for pancreatic cancer, an often fatal condition, in 2004.

Apple shares fell more than 6 percent in European trading on Monday after Jobs made his announcement on a U.S. holiday and another 2.5 percent by midday in U.S. trading on Tuesday.

While it is uncertain exactly how much the world's top hedge funds lost because they bought at different prices, the punch was certainly felt, analysts and managers said.

EVERYONE IN

"Almost everyone owns it," said hedge fund manager Shawn Kravetz, whose Boston-based hedge fund Esplanade Capital liquidated its Apple position some time ago. "This feels a little like the worst group think ever."

Kravetz attributed the stock's popularity to its innovative products, strong management team and relatively reasonable price.

Lone Pine Capital, run by Stephen Mandel, is the hedge fund with the biggest Apple holding, some 2.7 million shares at the end of the third quarter. The stake outranks investing powerhouses like Morgan Stanley Smith Barney LLC and Deutsche Asset Management Americas in size, data from ThomsonReuters show.

Mutual fund firms like Fidelity Investments and T.Rowe Price are also big owners of Apple and have bigger stakes than hedge funds.

Among hedge funds, following on Mandel's heels is D.E. Shaw Investment Management, with 2.4 million shares at the end of September, and Renaissance Technologies, founded by James Simons, which listed 1.96 million shares.

Fund managers will release their most recent data -- what they held at the end of the year -- in February.

David Einhorn's Greenlight Capital owned 837,500 Apple shares at the end of the third quarter during which he added 525,000 shares.

When asked about Jobs' announcement, Einhorn said, "I wish him good health," but declined further comment.

Several other fund managers with a technology focus have been big Apple investors, and many expanded their positions in the third quarter as shares climbed about 13 percent.

Chris Shumway's Shumway Capital Partners owned 1.8 million after adding 1.1 million in the third quarter. Philippe Laffont's Coatue Management owned 1.5 million shares and Maverick Capital founder Lee Ainslie, who in October called technology stocks the cheapest in two decades, owned 1.3 million shares.

FEELING THE PAIN

While these managers are surely feeling pain from Apple's stock decline, analysts noted that many are still far in the black considering Apple's meteoric rise over the last years.

Long-time shareholders lived through a similar experience in 2009, when Jobs announced his previous medical leave. In that case the stock price fell 5.6 percent within a week but quickly reversed and was up 139 percent within a year.

"If people get hurt here it is not likely to be very badly, because Apple is such an extraordinary company," Esplanade Capital's Kravetz said.