Some of the biggest hedge funds that helped make Apple a stock market darling lost faith and dumped their stakes in the fourth quarter, fuelling the massive drop in the iPhone maker's share price.
Noted stock pickers including Leon Cooperman, Eric Mindich and Thomas Steyer unloaded billions of dollars of Apple shares between 30 September and 31 December, according to disclosure documents filed on Thursday.
Shares of Apple rose to an all-time high of $705.07 on 21 September but ended 2012 down more than 24% from that peak as investors worried about increasing competition and declining profit margins.
The shares also may have dropped because their price rose too much, too fast.
"The stock just went up so much in early 2012 and then was coming back to earth," said Justin Walters, co-founder of Wall Street research firm Bespoke Investment Group. "Three months from now, we'll be seeing a lot of the people who sold starting to pick it up again."
The fourth-quarter sellers avoided even deeper losses. Apple's shares have lost 12% so far this year. The shares lost 42 cents, or 0.1%, to close at $466.59 on the Nasdaq on Thursday.
Cooperman's Omega Advisors fund dumped its entire stake of more than 266 000 shares during the fourth quarter, according to its required quarterly disclosure form filed with the Securities and Exchange Commission.
Mindich, named the youngest partner ever at Goldman Sachs before starting his Eton Park Capital Management fund in 2004, got out of Apple entirely in the fourth quarter after making big sales in the third quarter as well. Eton owned 600 000 shares at the beginning of 2012.
Farallon Capital, the hedge fund founded by Steyer, sold 137 000 shares. Steyer, who once worked on the Goldman Sachs risk arbitrage desk under Robert Rubin, stepped down at the end of the year from the firm, which he founded in 1986. Rubin served as US Treasury secretary from 1995 to 1999.
Jana Partners, an activist fund run by Barry Rosenstein, also unloaded its entire Apple stake of more than 143 000 shares. Other notable sellers included Third Point LLC, which had owned 710 000 shares; Viking Global Investors, which dumped 1.1 million shares; and Lone Pine Capital, which sold over 800 000 shares.
A much smaller line-up of funds bought shares amid the stock's crash. David Tepper's Appaloosa Management nearly doubled its stake during the quarter to about 913 000 shares. George Soros more than doubled his stake to about 184 000 shares. David Einhorn, who last week sued Apple in a bid for higher dividends, added 20% to his holdings to end the quarter with 1.3 million shares.
Profitable trades
Despite the plunge in Apple's stock price, most of the managers likely exited their positions with substantial profits because they bought years earlier. Rosenstein and Cooperman, for example, both started gathering their stakes in the middle of 2010, when Apple shares traded below $300.
At the time, the company's iPhone 4 was beset by alleged faulty reception, a problem that became known as "antennagate". Apple's then-chief executive, the late Steve Jobs, famously dismissed the issue, saying "we don't think we have a problem". But Apple offered customers a free bumper case that was supposed to minimise any issues.
Customers did not seem to care, snapping up millions of iPhones and sending Apple's share price up almost 50% over the next year.
Apple came under further scrutiny last week from Greenlight's Einhorn. Einhorn filed a lawsuit to block changes in Apple's policy for issuing preferred stock. Instead, Apple should issue a new class of preferred stock to share more of its $137 billion cash hoard with shareholders, Einhorn said.
Apple CEO Tim Cook dismissed the moves as a "silly sideshow" on Tuesday.
Some trimmed
Not all well-known hedge fund Apple fans cut ties in the fourth quarter. Some only trimmed their holdings. Philippe Laffont, who worked under famed hedge fund manager Julian Robertson before striking out on his own at Coatue Management, sold about 18% of his Apple shares. Coatue ended the year with a still sizable 643 000 shares.
Chase Coleman, another manager who worked for Robertson, reduced the Apple stake at his Tiger Global Management fund by 19% to just over one million shares. Robertson's own Tiger Management LLC fund trimmed its Apple stake by 28% to about 42 000 shares.
Large hedge funds are required to disclose their US stock holdings within 45 days after the end of each quarter. But the filings may not give a complete picture of each fund's moves, since only US-listed shares and options must be revealed. Bonds, foreign shares and derivatives are not included, and short positions, or bets that a stock will fall in price, are not listed.
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