FILE PHOTO: The Apple Inc. logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. REUTERS/Mike Segar/File Photo
NEW YORK: Warren Buffett’s sudden sale of a huge pile of Apple Inc shares has come with a surprise silver lining for investors in the iPhone maker – its influence in major stock indices is set to be fully unleashed.
Apple’s weighting in a slew of benchmarks has been depressed for years because Buffett’s Berkshire Hathaway Inc tends to hold its investments for the long run, making them unavailable for trading.
As a result, index providers calculated the tech company’s weight based on a methodology known as float-adjusted market capitalisation.
Put simply, Apple’s true value is not reflected in many indexes.
In percentage terms, the numbers don’t seem huge – in the case of the S&P 500, for instance, 94% of Apple’s value is currently considered.
That should now increase to 100%, according to Piper Sandler & Co. But in a US$3 trillion company, it adds up.
In the wake of Berkshire’s sale, passive funds tracking these indices may now have to buy as much as US$40bil of Apple stock when they next rebalance, according to Piper Sandler’s estimates.
That’s triple the average daily trading volume of the company’s shares over the past month. — Bloomberg
