Israel Englander, the CEO of Millennium Management, which ranks as the second most profitable hedge fund ever based on net gains, has made significant adjustments to his investment portfolio. In the third quarter, Millennium sold a substantial amount of its Apple stocks, despite the company maintaining a diverse portfolio of over 6,000 stocks, index funds, and options.
Englander disposed of 11.5 million shares of Apple (NASDAQ: AAPL), which slashed his stake by an impressive 90%. Formerly, Apple was among the top 10 holdings for Millennium, but it has now fallen out of the top 75. In contrast, he increased his investment in the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) by purchasing 2.4 million shares, raising his stake by 81%. This ETF currently stands as his seventh largest holding, taking the top spot if options contracts are set aside.
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Market Outlook: The S&P 500’s Promising Decade Ahead
Interestingly, Ed Yardeni from Yardeni Research expects the S&P 500 (SNPINDEX: ^GSPC) to see considerable growth in the coming decade. He suggests that the booming economic growth characterizing the last few years, referred to as the “roaring 2020s,” could lead to annual returns of 11% in the next 10 years, resulting in about 180% total returns by 2034.
Investors should consider both Apple and the SPDR S&P 500 ETF Trust closely.
Analyzing Apple: A Top Player in Consumer Electronics
Apple has solidified its reputation as a leader in consumer electronics, particularly with its iPhone, which remains the highest-selling smartphone globally. Warren Buffett once remarked that people might part with their second car before giving up their iPhone.
The iPhone generates the majority of Apple’s revenue and sustains its rapidly growing services sector. In the fourth quarter, sales increased by 6% to $95 billion, attributed to both a 6% rise in iPhone revenues and a 12% growth in services revenue. Additionally, non-GAAP earnings rose 12% to $1.64 per diluted share.
Notably, in October, Apple introduced Apple Intelligence, a new suite of AI features for its latest iPhone and MacBook models. While analysts predicted this could spur a significant upgrade cycle, initial consumer interest appears tepid, as reflected in waiting times for new iPhones.
David Vogt from UBS recently pointed out that, “Demand appears muted despite consumers familiarizing themselves with Apple Intelligence.” Additionally, the newly launched iPhone 16 continues to be priced the same as the previous year’s models, despite incorporating AI technology.
In conclusion, while Apple remains a strong business with a dominant position in consumer electronics, its stock trades at a high valuation—increasing by 30% since announcing Apple Intelligence in June—currently at 42 times earnings versus the three-year average of 29. This raises questions about whether its growth potential today surpasses that of three years ago; if not, caution might be advisable.
SPDR S&P 500 ETF Trust: A Growing Investment
The S&P 500 is a key indicator of the U.S. stock market, encompassing 500 large domestic companies from every major sector, accounting for approximately 80% of U.S. equities and 50% of global equities in market value, according to S&P Global.
The SPDR S&P 500 ETF Trust tracks the S&P 500’s performance, allowing investors to diversify their investments across influential companies. Here are the 10 largest holdings in the ETF by percentage:
- Apple: 7.4%
- Microsoft: 6.5%
- Nvidia: 6.3%
- Alphabet: 4.5%
- Amazon: 4.2%
- Meta Platforms: 2.6%
- Tesla: 2.4%
- Broadcom: 2.2%
- Berkshire Hathaway: 1.6%
- JPMorgan Chase: 1.3%
Yardeni’s projection of a 11% annual return for the S&P 500 hinges on the continuation of the productivity surge observed in recent years. Real U.S. GDP growth of 2.7% annually over the past three years outpaces the 20-year average of 2.2%.
While economic fundamentals drive stock market performance, predicting its trajectory remains unpredictable. Nonetheless, with advancements in artificial intelligence, there is potential for sustained productivity growth, possibly influencing economic improvement for years to come.
To summarize, the SPDR S&P 500 ETF Trust gives investors access to some of the world’s most significant companies at a fair price. The fund has an expense ratio of 0.0945%, equating to $9.45 annually on every $10,000 invested. It’s advisable for most investors, especially stock enthusiasts, to consider including an S&P 500 index fund in their portfolio to mitigate risks of individual stock volatility.
Is Now the Right Time to Invest $1,000 in Apple?
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JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Additional board members include executives from Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, S&P Global, and Tesla.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
