To temper the volatility of Apple shares, Nasdaq officials will rebalance the Nasdaq-100 index in May. The Nasdaq rebalancing lessens the weight of Apple stock on the total value of the Nasdaq index by half. Nasdaq’s stirrings will shrink the propensity of financial institutions of the hedge fund type to cynically disrupt the natural rhythms of Apple stock so that average Joes can count on a more reasonable possibility of return on investment down the road.
Shifting Apple to fix the Nasdaq
A rise in Apple stock has also been an increase in the Nasdaq-100 in the last few years. Since the market bottomed out in 2009, the Mac, iPhone and iPad have driven Apple shares skyward more than 250 percent. Apple stock went up since then another 150 percent. That is more than 20 percent of the Nasdaq-100 total value. In accordance with Nasdaq officials, Apple stock has ballooned to more than twice the weight it should have on the index. Apple shares will be less than 12 percent of Nasdaq-100 shares after the May 2 Nasdaq rebalancing. The adjustment to repair for Apple realigns the ratio for the company's stock and outstanding shares with the way the Nasdaq-100 is calculated. The change also decreases weighting for 81 other companies. Apple rivals may gain due to this. A Microsoft raise is expected. It should go from 3.4 percent to 8.3 percent total. Oracle will rise to 6.7 percent, Google will rise to 5.8 percent, and Intel will climb to 4.2 percent.
How hedge funds manipulate the market with Apple rumors
Any future manipulation by hedge fund traders that could hurt the Nasdaq-100 or short Apple will be prevented by the lower ratio of Apple shares. Jason Schwartz at Seeking Alpha describes a recent instance in which unconfirmed conjecture about Apple based on vague sources subjected Apple stock to irrational price swings. There was a rumor that the iPad 2 would be delayed until June in February by hedge fund Yuanta Securities when Apple was trading at $360. Yuanta Securities shorted Apple shares while the rumor spread. It only took two days to decrease Apple stock. It had a $20 decrease. Shortly afterward, Steve Jobs, who was given six weeks to live by bloggers, announced that the iPad would go on sale March 10. Investors who should have known better felt duped, and Yuanta padded its returns. The Nasdaq-100 was affected because of this.
Can't even see the impact anymore
The Nasdaq rebalancing doesn’t take impact until next month, but money managers are already rebalancing their holdings. A drop occurred on Tuesday in Apple stock during this. It brought on a $4.19 decrease from $337 to $341.19. The ability of hedge funds to manipulate the market using Apple already has been diminished. Analysts do not expect the latest iPhone delay rumors (which would freeze the iPhone market and hurt Apple if they were true) to work because Apple stock remains about $15 below its high and is trending upward again. Apple is anticipated to do better than expected in first quarter earnings while investors and traders can trade Apple shares.
Citations
Fortune
tech.fortune.cnn.com/2011/04/05/a-good-day-to-buy-aapl/
Mac Observer
macobserver.com/tmo/article/nasdaq-100_to_cut_apples_index_share_nearly_in_half/
MSN Money
money.msn.com/market-news/default.aspx?feat=e52a3c86-3053-48e5-91eb-970765febdcc
Seeking Alpha
seekingalpha.com/article/260887-hedge-funds-bloggers-and-the-origin-of-apple-rumors
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