High-flying Apple falls to earth as investors fret over taxes

Fri Nov 16, 2012 4:55pm EST
 
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By Leah Schnurr and Chuck Mikolajczak

NEW YORK (Reuters) - Gravity has taken hold of Apple, and a lot of investors have been smacked on the head.

Apple Inc, the largest U.S. stock by market value, was headed toward its eighth straight week of declines on Friday, as the rush to secure profits before a potential hike in capital gains taxes next year has investors dumping the market favorite.

Since hitting a record high of $705.07 a share in September, Apple has lost about a quarter of its value. The stock's descent has vastly outpaced those of the S&P 500, which is down just under 7 percent in the same time frame.

"No individual investment can defy gravity," said Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank, in San Francisco.

The declines have shaved about $170 billion off the company's market capitalization -- or just a bit more than the entire value of Coca-Cola. Apple is still currently worth about $493 billion, about $100 billion more than the second-most valuable U.S. company, Exxon Mobil.

Apple on Friday afternoon was little changed, up 0.2 percent at $526.59.

Taxes on capital gains and dividends are likely to rise next year as part of an expected deficit-cutting deal to avoid the so-called fiscal cliff of scheduled tax hikes and spending cuts.

With a stock like Apple, where investors may have large embedded capital gains as a result of its stellar run, selling now locks in gains and offsets the possibility of higher taxes next year. The uncertainty over the outcome of talks in Washington over the fiscal cliff has sapped the natural inclination to buy declining shares.   Continued...

 
The Apple logo hangs in a glass enclosure above the 5th Ave Apple Store in New York, September 20, 2012. REUTERS/Lucas Jackson