Investors roll the dice as Apple's value booms

Tue Mar 6, 2012 9:35am EST
 
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By Angela Moon and Doris Frankel

(Reuters) The world's most valuable company has turned into a bit of a casino stock.

Since Apple Inc on February 29 became only the sixth company in U.S. history to top $500 billion in market capitalization, trading has become more volatile, indicating that more investors are tracking headlines and looking for quick gains.

Apple has gained 32 percent since the beginning of the year, outstripping its gains for all of 2011. It accounts for more than 4 percent of the weight of the S&P 500 index, a kind of outsized standing that has caused its moves to dictate market direction on a daily basis.

That's a trend that is causing consternation among some players in the market. They note that other companies that had become members of the elite $500 billion club not only couldn't sustain their standing, but weighed on the entire market as they fell.

For long-term investors, the stock of the iPad and iPod maker has been a winner, the ultimate in buying and holding. From a short-term basis, buyers have gotten much more fickle.

"Apple has become a favorite daytime trading stock for short-term traders. It's one of the rare stocks that have momentum followers and that move on headlines that are not related to earnings," said David Rolfe, chief investment officer at Wedgewood Partners in St. Louis, Missouri. The firm manages $1.5 billion in assets and owns Apple shares.

Intraday swings in Apple are at the most volatile levels since October last year. The swings have averaged around $12 a day for the past two weeks, compared with about $14 in October.

On Monday, Apple shares plunged 3.1 percent in about 10 minutes around 11 a.m., which pushed the company's market cap below that $500 billion threshold. Trading volume spiked during the drop to almost 3.8 million shares, the heaviest 10 minutes of turnover since February 15, when the stock's shift in direction pulled the market with it.   Continued...

 
People walk past an Apple billboard advertising the iPad 2 in downtown Shanghai March 1, 2012. REUTERS/Carlos Barria