Thursday, January 24, 2013

Apple's Stock Drop May Hurt Funds





Last year the billionaire hedge fund manager David Einhorn predicted that Apple’s market capitalization could hit $1 trillion. He long ago made Apple one of his hedge fund’s biggest holdings and in a letter dated just two days ago Einhorn told his investors he had purchased more Apple shares as the price declined late last year. “We used the lower prices as an opportunity to repurchase the shares we sold in the third quarter,” Einhorn wrote.

Einhorn’s hedge fund was down 4.9% net of fees in the fourth quarter of 2012, thanks partly to the performance of Apple’s shares. “Our Apple was bruised,” he noted to his investors. The question now is, will Apple sink Einhorn and other hedge funds in 2013?

Despite underperforming the U.S. stock market for four straight years, the hedge fund industry has found success betting on Apple, enjoying the stock’s incredible performance as it rose from $200 to $500 and eventually reaching $700 per share. It has been, by far, the most popular stock among hedge fund managers, who are paid rich fees by their investors….

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