Although shares of Apple have been trending upward, institutional investors including hedge funds, banks, mutual funds and other powerful types of financial institutions haven’t yet bought in, suggesting that when they do, AAPL stock could move much higher. Analyst Katy Huberty with Morgan Stanley issued a research note to investors recently, revealing data showing that the top 100 institutions reduced their positions in Apple from the fourth quarter of 2013 to the first quarter of 2014. As it stands, Apple is the only large-cap technology company where institutional ownership is below the S&P 500 weighting of 3.2% with Amazon, Google, Facebook and even Microsoft all being ahead of their S&P 500 weighting.

This is because institutional investors recently rotated into “value” and out of “hyper growth” stocks according to Huberty. The transition is said to have benfitted HP and Microsoft, both of which saw their portfolio allocation levels grow 10 basis points from the fourth quarter of 2013 to the first of 2014. As of right now, the top 100 holders of AAPL stock are “significantly underweight” according to Huberty. That’s in contrast to the “overweight bias” the same investors have for every single other large-cap stock in her analysis, which also includes names like Cisco, Oracle, Qualcomm, Intel and IBM. Huberty said the following regarding the matter:

We believe this sets up well for further share price upside heading into the iPhone 6 product cycle, iWatch launch, and potential new services.
The same analyst called out unconventionally low institutional ownership of Apple in February, noting that ownership of AAPL stock among powerful financial institutions had reached a new 5-year low. Previously in February, Huberty revealed that the top Apple shareholders had allocated 2.2% of their total portfolios to the iPhone maker. Since then it’s actually dropped 20 basis points to 2% while S&P 500 weighting grew from 2.9% to 3.2%.

Morgan Stanley continues to see a buying opportunity in Apple for investors and has maintained its “overweight” rating for the company’s stock. It’s baseline price target is $690 though the firm has a “bull case” outlook of $860.

Source: Morgan Stanley via AppleInsider