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With AAPL 19.8% Of The NASDAQ, Is Another Rebalancing Imminent?

Tyler Durden's picture




 

Just over 16 months ago, the NASDAQ did an unusual thing. As the WSJ noted at the time, AAPL, which had reached a 20% weighting in the NASDAQ-100, was rebalanced to 12.3%. This weighting was apparently too much for the index-provider who feared "the tech company's big weighting means that a change in fortune for the maker of iPhones, iPods and iPads has a huge impact on one of the most heavily traded indexes in the market." Since 04/05/11, when that rebalance occurred, AAPL's market cap has doubled, while the NASDAQ-100 is up just under 20% ($627bn versus $3.15tn). With the current weighting of AAPL in the NASDAQ-100 at 19.8%, we wonder what is next - as the WSJ noted at the time, any "rebalancing is likely to kick off waves of trading... as money managers scramble to adjust holdings to reflect the new composition of the index." Interestingly, AAPL has reached 20% of the index twice this year already - which just happened to coincide with significant selling pressure on the stock - will third time be the charm?

In April of last year - AAPL reached over 20% weighting in the NASDAQ-100 index - and here is the rebalancing that occurred - via WSJ:

 

AAPL has risen 97% since the last rebalance, while the NDX has risen only 19.6% and its other major peers have not kept pace at all...

 

This leaves AAPL at 19.8% weighting by market cap in the index - which has occured twice before this year - and each time (as we show above) the company's share price has rolled over.

 

We can only imagine the need to control AAPL's weighting is critical given the amount of automated selling that would be involved were it to trigger a rebalance - and the sheer size and plethora of long-only managers who hold the giant tech company.

 

It does seem that this provides a short-term opportunity at a minimum - to be short AAPL and long NDX - as the 20% weighting limit that was discussed in the WSJ article seems critical.

 

Charts: Bloomberg

 

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Wed, 08/22/2012 - 19:13 | 2728966 realtick
realtick's picture

One way or another this stock is going lower. The volume ain't happening during this latest move up:

http://chartistfriendfrompittsburgh.blogspot.com/2012/08/apple-on-balanc...

Wed, 08/22/2012 - 20:48 | 2729121 Precious
Precious's picture

 

No rebalance. Just rename NASDAAPL.

 

Wed, 08/22/2012 - 21:55 | 2729222 Harlequin001
Harlequin001's picture

Tulips?

Wed, 08/22/2012 - 22:15 | 2729248 Muppet of the U...
Muppet of the Universe's picture

Goldman to up aapl projections to 750 billion XD

FaaaaaaappleDaQery!  & who would say ZH doesn't give good recommendations?  Excellent analysis!

 

Wed, 08/22/2012 - 23:07 | 2729316 boogerbently
boogerbently's picture

Split it (1:10) and all the FB losers can afford to make back their $$$.

Wed, 08/22/2012 - 19:16 | 2728972 Rainman
Rainman's picture

When AAPL fall off tree, at least they land on a mountain of fiat....BTFD !!

Wed, 08/22/2012 - 20:18 | 2729057 vast-dom
vast-dom's picture

long NDX????? r u nuts? if apple goes south so too deos NDX!

 

i knew someone who shorted apple over summer and is walking with a nice not so little limp....

Wed, 08/22/2012 - 20:47 | 2729091 JohnKozac
JohnKozac's picture
HP posts mega-loss, $8.9 Billion (and that's only for this quarter!)

 

SAN FRANCISCO (Reuters) - Hewlett-Packard Co swung to an $8.9 billion quarterly loss as personal computer sales shrank again and it swallowed a huge write-down linked to its $13.9 billion purchase of Electronic Data Systems Corp.

 

http://finance.yahoo.com/news/hp-posts-mega-loss-eds-writedown-204341965...

 

 

Thu, 08/23/2012 - 07:17 | 2729605 Frastric
Frastric's picture

Wahay! Gonna make some serious virtual money on Investopedia, shorted that stock!

Wed, 08/22/2012 - 19:17 | 2728974 reader2010
reader2010's picture

Still smaller than the South Sea Bubble. Go AAPL? 

Wed, 08/22/2012 - 19:27 | 2728992 artman1933
artman1933's picture

No not yet! AAPL has to reach $750-800 to reach 24%. 

 

https://indexes.nasdaqomx.com/docs/NDXSpecialRebalancePresentation.pdf

 

Facebook will probably be included in the NASDAQ100 sometime in September. This will probably result in a mini-rebalance of AAPL. 

The percentages are updated daily by 9:00 AM at the following site:

http://www.invescopowershares.com/products/holdings.aspx?ticker=qqq

 

Thu, 08/23/2012 - 00:42 | 2729437 veyron
veyron's picture

Highly doubtful that FB will join ...

Wed, 08/22/2012 - 19:26 | 2728997 marco1324
marco1324's picture

Only takes one bad AAPL to spoil the barrel but I dont think its this one until ... 27th of September.

Wed, 08/22/2012 - 19:27 | 2729000 buzzsaw99
buzzsaw99's picture

nasdaapl

Wed, 08/22/2012 - 19:37 | 2729011 Neethgie
Neethgie's picture

aapl misses earnings, but the market things fuck it and continues climbing anyway

Wed, 08/22/2012 - 19:37 | 2729012 RobinHood73
RobinHood73's picture

With the fed minutes today, QE is now 100% fully reflected in share prices, regardless of whether they act or not.  The fed has shot their remaining bullet. It sort of a moot point now whther they act or not. The market has 100% discounted this possibility.  And they may choose not to, given how unpalatable and political it would  appear.There is only downside macro risk. The macro/fed assymetry at this time may be the most attractive we have ever seen for shorting the market.  The fed may have to resort to purchasing stocks directly now to save the primary dealers/HFT who are loaded up to their eyeballs in stocks, waiting for a retail flow that will never show.

Wed, 08/22/2012 - 19:38 | 2729014 Barometer
Barometer's picture

People coming off contract in the next 12 months are going to change to Samsung Galaxy, it's a matter of time because it is just so much better. I am looking forward to watching the check out desk at The Hedge Fund Hotel

Wed, 08/22/2012 - 19:48 | 2729025 buzzsaw99
buzzsaw99's picture

didn't you hear? crAAPL patented the rectangle.

Wed, 08/22/2012 - 19:41 | 2729016 machineh
machineh's picture

One thing likely to occur soon is that the equal-weighted Naz 100 will start outperforming the value-weighted Naz 100 ... just as the equal-weighted S&P 500 beat the value-weighted S&P 500 from 2000 to 2002 (and for the same reason -- overvalued tech stocks deflating).

Wed, 08/22/2012 - 20:03 | 2729042 roadsnbridges
roadsnbridges's picture

Does this mean QID will be dead?

Wed, 08/22/2012 - 20:04 | 2729044 YesWeKahn
YesWeKahn's picture

QQQ? I think it should be renamed to ASS (apple sole society)

Wed, 08/22/2012 - 20:08 | 2729047 Brother Sebastian
Brother Sebastian's picture

The market manipulators won't let the AAPL fall too far from the tree.  Without it, there wouldn't be stock market.  And I'm sure you know what I mean.

Wed, 08/22/2012 - 20:10 | 2729050 roadsnbridges
roadsnbridges's picture

Stephanie Cutter Looks a lot like Kirsten Powers.  Is she from Alaska, too?

Wed, 08/22/2012 - 20:19 | 2729064 nmewn
nmewn's picture

ROTFL!!!

That nose is illegitimate ;-)

Wed, 08/22/2012 - 20:16 | 2729055 roadsnbridges
roadsnbridges's picture

Still unsure.  Will the NASCrapple become it's own index?

Sorely need a stupidity index...

Wed, 08/22/2012 - 20:17 | 2729059 SwingForce
SwingForce's picture

Why not exclude FOOD & ENERGY from the S&P 500? That would knock out #1 Apple & #2  Exxon/Mobil . Why not? Govt excludes such volitility from inflation readings, is this not EXACTLY the same thing???

Wed, 08/22/2012 - 20:28 | 2729080 roadsnbridges
roadsnbridges's picture

This sounds like Hope and Chains, baby!

Wed, 08/22/2012 - 20:41 | 2729107 poor fella
poor fella's picture

Apple would really have something if only they would make a man's version of the iPhone. It's completely insane to only make a girl's version. If they do this, I'm calling it FIRST  - APPL  $1440/share  -  50% NASDAQ (especially as they sue anyone that makes a 'golden rectangular' shaped dohicky that makes calls).

Wed, 08/22/2012 - 21:41 | 2729199 roadsnbridges
roadsnbridges's picture

S lets Virgin sell the HTC EVO; much better.  But no mommy SIRI.

Wed, 08/22/2012 - 22:04 | 2729239 poor fella
poor fella's picture

Is it JUST ME that physically wretches at the sound of that cot damn computer generated voice?!?!? I would have been through 4 of those things by now after a SIRI beatdown..

I have a pretty good imitation of her, whenever I REALLY want to piss myself off  ;)

(still digging an older HTC TPII with real keyboard), phones are getting a tad large IMHO - might have to go back to an Upstage! =D

Wed, 08/22/2012 - 20:46 | 2729118 Precious
Precious's picture

...

Wed, 08/22/2012 - 20:50 | 2729126 NoClueSneaker
NoClueSneaker's picture

... Newton will be, right on time there, when the APPL discovers the gravity ...

Wed, 08/22/2012 - 22:13 | 2729247 Meesohaawnee
Meesohaawnee's picture

thanks much for jawboning crude to 98 ben. .yea that will get the iphone racin off the racks.

Wed, 08/22/2012 - 22:16 | 2729250 netplus
netplus's picture

The last time the nasdaq rebalanced Apple, Apple shares dipped in premarket trading, before recovering during regular U.S. trading hours.  It will just be another dip that can be bought.

Wed, 08/22/2012 - 22:27 | 2729273 AU5K
AU5K's picture

Just replace the rest of the stocks in the NDX with more AAPL.

 

Wed, 08/22/2012 - 22:59 | 2729307 q99x2
q99x2's picture

I looked at my brother's IPhone to see if I could use something like that. I couldn't easily use it for a map that was of use to me. I couldn't surf the web easily. I think I'm going to use the money for a dual boot Linux and Windows notebook and buy a camera as well. I'll keep my old Nokia phone. Mayswell bulldoze Apple along with the banks after the collapse.

Thu, 08/23/2012 - 00:29 | 2729418 I am a Man I am...
I am a Man I am Forty's picture

Hey tyler, you can add another company in to equal apple's market cap, hpq lost 9 billion this quarter, lulz

Thu, 08/23/2012 - 03:01 | 2729519 catch edge ghost
catch edge ghost's picture

Ohh I get it. There's other stocks besides Apple.
Weird.

Thu, 08/23/2012 - 08:46 | 2729818 falak pema
falak pema's picture

market? Oh maaaaaaaaaaaaaaaaarket! 

like aaaaaaaaaaaaaaaapple! 

Thu, 08/23/2012 - 04:13 | 2729542 ebworthen
ebworthen's picture

So...where's "the" stock index that includes everything?

I mean, why cherry pick apples (hah-hah) in U.S.A. to represent how the entire fruit and nut crop the world over is doing?

Oh wait...

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