The Tell: Howard Marks says good luck beating the stock market without Apple, other big winners this year

by | Sep 12, 2023 | Stock Market

Investors are often enticed into “taking profits” in winning stocks, but people who sold shares of Apple or other “Magnificent Seven” stocks this year are probably falling behind the main equity indexes, wrote veteran investor Howard Marks, co-chairman of Oaktree Capital Management, in a memo to clients. “The performance of the equity indices is often dominated by a few stocks or groups of stocks,” Marks wrote, in a Tuesday note. “The gains of the leaders can make them seem expensive, arguing for profit-taking.”

Yet investors who cut their exposure to the big winners “relative to their representation in the indices,” by “taking some money off the table,” will have a hard time keeping up, if the winners keep outperforming, he said. Take shares of Apple. Inc.,
one of the year’s so-called magnificent seven stocks, along with
Google-parent Alphabet
Meta Platforms
or Tesla.
which have been driving the S&P 500 index’s
near 17% gain on the year through Tuesday. Deep Dive: Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks Shares of the seven stocks were up some 36% to 209% so far in 2023, according to FactSet. “Clearly, you’d be far behind the indices,” Marks wrote of investors who didn’t own any shares of the magnificent seven earlier this year. However, another pitfall would be owning too little exposure. Take Apple’s stock, which increased almost 12-fold since its $15 price in 2013 to almost $180 in recent days, but was up nearly 500 times since 2003. “I doubt many people watched Apple go from $0.37 to $180 without selling any,” Marks wrote. He also asked, “How many active investors would allow Apple shares to constitute nearly 8% of their portfolios, which was its weight in the S&P 500 at the recent peak?” That’s a key reason why Marks said his long-standing thesis of “owning fewer losers and more winners” still feels right three decades after he wrote his first investing memo. Live Coverage: The iPhone 15 is coming: Everything to expect from Apple’s big event Big technology stocks were hit hard last year as the Federal Reserve kicked off one of its most aggressive rate-hiking campaigns in four decades, buy they continue to be volatile this year on rising bond yields. The benchmark 10-year Treasury yield
was flat near 4.29% on Tuesday, but still near its multidecade high. Apple shares were down 1.6% at last check. The S&P 500 was off 0.4%, Nasdaq Composite Index
was 0.8% lower and the Dow Jones Industrial Average
was 0.2% higher.

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