Investors watching Apple’s race to $1T
401(k) owners have big stake in iPhone maker
Investors with 401(k)s have a lot at stake in Apple’s race to become the first company with a $1 trillion market value.
Apple, worth roughly $916.4 billion according to Bloomberg data through May16, is the world’s most-valuable company, giving it some serious economic horsepower.
Not only do tens of millions of Americans use Apple products such as the iPhone and iPad, but the stock also is one of the most popular and frequently traded. The company’s swelling market value now accounts for 4.1% of the Standard & Poor’s 500, the biggest weighting in the large-company stock index. That means investors who don’t own an iPhone or never bought a single share of Apple on their own, but who have S&P 500 index funds or exchange-traded funds in their 401(k)s, still have big exposure.
And that exposure could soon get bigger as the company approaches the $1trillion market cap. Each share of Apple, which fell 0.6% Thursday to close at $186.89, would need to climb to about $197.24, or another 5%, to reach the milestone.
Mutual fund giant and leading index-fund provider Vanguard owned nearly 349 million Apple shares at the end of 2017, or roughly 7% of all outstanding shares — the most of any financial firm. BlackRock, the world’s largest money manager and a major player in the ETF business, owned 6.3% of the company.
“So many investors have skin in the game with Apple,” says Chris Rupkey, chief financial economist at MUFG, a New York-based financial firm.
Here are a few key things 401(k) investors need to know about Apple’s impact on its own bottom line:
❚ The index effect: Investors who own funds such as the Vanguard 500 Index Fund or the SPDR S&P 500 ETF — funds that mimic the S&P 500 stock index and match its returns — should be aware that Apple has the biggest impact on fund performance.
“Your fortunes are more tied to this company than any other,” says Christian Thwaites, chief strategist at investment advisory firm Brouwer and Janachowski in Mill Valley, Calif.
❚ Sign of a top? Just as there’s talk of a market top when the Dow Jones industrial average hits a level such as 25,000, the same holds true when a company such as Apple hits a milestone Wall Street has never seen.
It’s the type of event that can get investors squeamish about a potential peak in a stock or the broader market, Thwaites warns.
❚ Is it a reason to sell? Market value alone isn’t a big enough signal to call a top in an individual stock, says Michael Farr, president and CEO of money-management firm Farr, Miller & Washington in Washington, D.C.
“I can’t imagine setting a market cap as a trigger for sale (of a stock),” Farr says. “Market cap doesn’t make something expensive.”