Tags: Apple | size | distort | indices

Apple’s Size Distorts Views of Stock Indices, Earnings

Friday, 17 Feb 2012 08:10 AM

By Dan Weil

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Apple has made many shareholders happy, with a gain of 42 percent in its stock price over the past year.

But its huge rise in market capitalization – to a world leading $475 billion – makes it difficult for investment strategists to get a true picture of what’s happening to stock indices and the earnings of companies within them, The Wall Street Journal reports.

Earnings for all companies in the Standard & Poor's Index are on track for a fourth-quarter increase of 6.6 percent year over year. But excluding Apple's profit, the anticipated rise shrinks to only 2.8 percent, according to UBS.

"By stripping away that one single company, it is like seeing light through a prism. You see things more clearly," Jonathan Golub, UBS’ chief U.S. equity strategist, tells The Journal.

Apple’s earnings constitute about 6 percent of the S&P 500's total for the fourth quarter, according to S&P Indices.

Apple also has an outsized influence on stock indices, many of which determine a stock’s weighting by its market cap. Apple accounts for 3.8 percent of the S&P 500. For the Nasdaq-100 it’s 16.6 percent, more than Google, Intel and Amazon.com combined.

Apple shares topped $500 Tuesday, and many investors expect further gains. “We think the stock has higher to go, $600 is next,” Timothy Ghriskey, chief investment officer of Solaris Group, tells Bloomberg.

“It’s still inexpensive for a company that is executing at the very highest level and continues to innovate.”


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