Amazon overtakes Apple as the 'must have' stock
Published 10/09/2015 | 02:30
Last year, failing to own Apple shares was the most painful mistake a US equity fund manager could have made, because of the stock's strong gains.
This year, that distinction goes to Amazon.com. Up 67pc in 2015, the online retailer has contributed the most to mitigating losses in the Standard & Poor's 500 Index this year.
Amazon's ascent has been aided not just by Apple's misfortunes, but by its perceived haven status at a time when investors want nothing to do with emerging markets.
The company, which gets 57pc of its revenue from North America, is less exposed to global growth than its peers.
"Nervous investors are looking to shift money from Apple, and for lack of new ideas, they're crowding into Amazon," said Hugh Grieves, a London-based fund manager at Miton Group, who runs the firm's US Opportunities Fund.
"There is also an element of fund managers with an S&P 500 benchmark feeling as though they must own these stocks or else they are at risk of chronic underperformance."
In five of the past six years, as the S&P 500 more than doubled, Apple ranked as the No 1 driver of the index.
It has now given up most of its 2015 gains, and energy producers Exxon Mobil and Chevron have plunged, contributing 18pc of the S&P 500's losses.
That's made the benchmark measure one of the worst performers out of 24 developed equity markets this year.
Among funds that track their performance against the S&P 500 and manage at least $500m in assets, those overweight Amazon - meaning they hold more of the stock than its 1.1pc makeup in the index - lost an average 2.2pc this year. That compares with a 4.5pc decline for funds with a smaller stake, according to the latest regulatory filings compiled by Bloomberg.
Gains in the shares have made them expensive compared with its megacap Internet peers, trading at 71 times estimated earnings. Still, more than 80pc of analysts surveyed by Bloomberg have a buy rating. After posting a surprise quarterly profit in July, Amazon surged 24pc in that month while the S&P 500 rose 2pc.
By contrast, Apple has tumbled amid heightened concern over iPhone demand in China, down 15pc from a July 20 high. The company's profit is projected to increase 42pc this year and 7pc in 2016.
Analysts see Amazon's earnings tripling this year. Sales in 2016 are forecast to climb 19pc - almost four times Apple's pace. Emails and voice messages to Amazon and Apple seeking comment were not returned.
Apple chief executive officer Tim Cook holds his company's annual showcase in San Francisco this week.
Despite other products and services, the company, which is more globalised than Amazon, has never been more dependent on the smartphone for revenue.
Amazon is less tied to global growth concerns but must show investors it can continue to increase profits. (Bloomberg)