The companys shares are up 17% for the year, nearly three times the performance of Standard & Poors 500 stock index over the same time. Yet the company remains one of the most significantly underweighted stocks among large-cap fund managers, according to a Goldman Sachs report.
Part of the reason for a lack of portfolio manager enthusiasm is that Apple no longer seems to be the hot growth company of old, fund managers say. It has not introduced a truly new device since the iPad in 2010. In 2012, it began paying a dividend, typically a sign of a company whose days of rapid growth are behind it.
Apple reports results for its fiscal third quarter on Tuesday, July 22. Wall Street is expecting revenue of $38 billion in the June quarter, up about 7.5% from a year earlier. The company will also provide a forecast for the current quarter: on average, analysts are estimating revenue in the quarter will grow 8% to $40.4 billion.
The companys profits come mainly from its line of iPhones, which faces more competition from Samsung and a coterie of up-and-coming Chinese companies such as Huawei and Xiaomi, smartphone makers that are grabbing market share particularly in Asia with reasonably priced yet capable devices.
The company has been in a new-product slump for a while, and although its still growing, its becoming more of a value play than a growth play at this point, said Skip Aylesworth, a co-manager of the Hennessy Technology fund.
Aylesworth has owned Apple shares for 12 of the past 15 years but does not hold any now. (Apples) growth doesnt look that exciting when we can buy into a company that is growing 15-25%, he said. Aylesworth noted he has positions in companies such as SanDisk and Netflix, both of whose revenue has grow by 10% or more in their most recent quarters.
Apple is the largest holding in the $622 million Buffalo Growth Fund, where co-portfolio manager Chris Carter said the companys smartphone business should provide sustainable profit increases.
But Carter said Apples slowed growth in recent years is a factor potentially scaring off some growth managers, while its dividend may not be enough to attract value managers.
But some investors on Wall Street, who point to statements by Apple executives, are not as downbeat. CEO Tim Cook has promised new product categories for 2014, while senior
V-P Eddy Cue said in May that the companys pipeline was the best he has seen in his 25 years at the company.