Today: Hedge funds' federal filings show large sales of Apple (AAPL) stocks in the fourth quarter, a big driver for the Cupertino company's rapid stock decline. Also: Solar shares shooting higher, Wall Street tame overall.
Hedge funds dumped Apple shares, likely fueling stock drop
As Apple stock dropped like a coin off the Empire State Building observation deck following the arrival of the iPhone 5 last fall, analysts offered a plethora of possible reasons for the quick descent. However, filings arriving this week have shown a likely culprit behind Apple's dip into bear market territory: Large hedge funds selling millions of Apple shares at nearly the same time, flooding the market and driving the price down.
Money managers who handle more than $100 million in assets are required by law to disclose their moves in filings with the Securities and Exchange Commission within 45 days of the end of each quarter, so all larger hedge funds were required to detail their fourth-quarter moves by Thursday. Reuters took a look at their filings and saw a definite trend: Apple shares were getting sold left and right.
As reported Wednesday, Omega Advisors dropped more than 266,000 Apple shares in the quarter, picking up Facebook
Third Point, run by Yahoo (YHOO) board member Daniel Loeb, dumped 710,000 shares of Apple; Eton Park Capital Management continued selling after getting rid of some Apple shares in the third quarter, dropping all 600,000 shares it started 2012 with by the end of the year; Viking Global Investors sold 1.1 million shares, Lone Pine Capital sold more than 800,000 shares, and Farallon Capital dumped 137,000 shares. Other funds -- like Tiger Management, Tiger Global Management and Coatue Management -- sold off a portion of their Apple stakes.
While other hedge funds did add to their positions, it was not enough to counter the large chunks of Apple stock hitting the market in the final three months of 2012, which would have been a large factor in Apple's decline from an all-time high of $705.07 on Sept. 21 -- the day the iPhone 5 debuted in the United States -- to closer to $500 by the end of the year. That price has dipped even more in 2013, as Apple's most recent earnings report showed slowing growth in the company's record-breaking sales totals.
With so much Apple stock available on the open market, supply likely pushed down demand and, therefore, the price. With Apple trading more than 30 percent below its peak price, those hedge funds could look to buy back the shares at the lower prices soon, however.
"The stock just went up so much in early 2012 and then was coming back to earth," Bespoke Investment Group co-founder Justin Walters told Reuters. "Three months from now, we'll be seeing a lot of the people who sold starting to pick it up again."
In the meantime, Apple is facing pressure from the large investors who did not dump its stock last year to reward them, as seen in the recent lawsuit by David Einhorn, whose Greenlight hedge fund added to its Apple stock stash in the fourth quarter. While Apple is fighting Einhorn's lawsuit, the company said in court papers this week that it is considering some of his ideas for returning some cash to shareholders, as it seeks to keep its large investors happy.
Thursday, Apple continued to avoid volatility, dropping just 0.1 percent to close at $466.59, as its lawyers returned to a San Jose courtroom to kick off round 2 in its legal fight against Samsung. That closing price represents a 33.8 percent decrease from the all-time high Apple hit less than five months ago.
SunPower gets huge, out-of-nowhere bump as solar stocks stay hot
While Apple's sudden plunge is more plausible with that news, it may also take months to understand the most drastic current moves in Silicon Valley -- the jump in SunPower (SPWRA) and other solar shares.
San Jose-based SunPower increased a whopping 22.4 percent Thursday to close at $12.13, continuing a week of massive gains for the solar-panel manufacturer, with shares up 53 percent since the end of last week. SunPower isn't alone, as other solar stocks have also been rapidly rising: The only U.S. solar manufacturer larger than SunPower, Arizona-based First Solar, gained 7.6 percent Thursday to close at $34.92; San Mateo's SolarCity, a residential installer of solar systems, increased 4.5 percent to close at yet another all-time high of $18.43; and solar-wafer manufacturer MEMC Electronic Materials moved 5 percent higher to $5.06. Chinese solar manufacturers that trade on U.S. exchanges also gained.
Solar stocks have been largely derided since Chinese companies flooded the market with low-price solar panels, damaging U.S. manufacturers including the industry-marring bankruptcy of Solyndra. However, they suddenly seem to be popular again, as volumes are spiking extraordinarily high along with the prices -- SunPower saw volume of 15 million shares Thursday, nearly four times the stock's average of less than 4 million.
There does not seem to be one simple reason for the spike, as Forbes report Eric Savitz points out. Instead, there have been several small signals that solar is growing more palatable to investors, including Citigroup launching coverage of some solar companies with positive reports; a Monday report that predicted growth in solar projects, which specifically pointed out the strength of SolarCity's business model; and rumors of a possible GE bid for First Solar, which would further legitimize the industry.
There is no guarantee that the success of this week will continue, as SunPower had similar gains after selling two Southern California solar projects to a company owned by Warren Buffett earlier this year, only to see them disappear after reminding companies last week in its earnings report that it is not profitable.
Cisco drops after earnings report, but Nvidia, Applied Materials and NetApp gain
Wall Street continued to meander with little overall effect Thursday, with the major U.S. stock indexes all moving less than 0.1 percent. Silicon Valley stocks performed slightly better, gaining 0.2 percent despite investors' sour response to Cisco's (CSCO) earnings report.
The San Jose networking giant dropped 0.7 percent after an intraday rally from losses of greater than 1 percent, as investors reacted to slow growth that "fell short of breakout performance," according to Scott Thompson of FBR Capital. Silicon Valley's other important earnings reports from Wednesday led to gains Thursday: Sunnyvale's NetApp was relatively stable, gaining 0.1 percent; Applied Materials increased 0.9 percent on optimistic projections; and Nvidia rose 2.9 percent for the biggest gain among the earnings reporters.
Santa Clara's Agilent Technologies announced its earnings Thursday, and fell in after-hours trading after the scientific-instrument company revealed lower-than-expected results. Sunnyvale Wi-Fi equipment company Aruba had a better day, increasing 6 percent after receiving an upgrade from Morgan Stanley.
Among bigger-name Silicon Valley companies, Tesla dropped 0.4 percent after CEO Elon Musk unveiled his long-awaited blog post detailing issues with a New York Times review of the company's Model S. Hewlett-Packard (HPQ) gained just 0.1 percent after a report that it is developing a powerful tablet that runs on Google's (GOOG) Android operating system; Google moved 0.6 percent higher. Facebook managed to add 2.1 percent despite a BTIG analyst pointing out the dangers Twitter and other communications offerings present to the Menlo Park social network.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 1.78, or 0.06 percent, to 3,198.66
The blue chip Dow Jones industrial average: Down 9.52, or 0.07 percent, to 13,973.39
And the widely watched Standard & Poor's 500 index: Up 1.05, or 0.07 percent, to 1,521.38
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.