Apple 2.0

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A good day to buy AAPL?

April 5, 2011: 6:50 AM ET

Some long-term Apple investors view Nasdaq's rebalancing as a rare buying opportunity

Source: Wall Street Journal

With news guaranteed to roil the stock markets, the Wall Street Journal reported shortly after midnight Tuesday that Nasdaq OMX is set to announce a major rebalancing of its closely followed Nasdaq-100 index. According to the Journal:

"The move could mean significant selling pressure on Apple shares by money managers tracking the index. Because of the way the index has been calculated, Apple was given more than twice the weight in the index than it should have had based on its number of shares. Under the new plan, it will be reduced to the weight it should have given its size."

The report triggered some predictable grumbling among Apple investors, irked that Apple's (AAPL) shares will be punished for having grown four-fold in the past two years while Microsoft's (MSFT) will be rewarded for having lost 42% of their value in that time.

But judging from the overnight chatter in Investor Village's AAPL Sanity board, most Apple shareholders saw two advantages:

  • Apple should be more insulated in the future from manipulation by hedge funds, which have been accused in the past of shorting Apple and spreading rumors as a convenient way to push the entire Nasdaq-100 down
  • If the stock does get dumped Tuesday by money managers scrambling to rebalance their holdings, it will give long-term investors a rare opportunity to buy the world's most valuable technology company at a bargain price

"Get your stink bids set!" wrote Julian Alexander, a regular on AAPL Sanity who posts under the handle Tommo_UK.

"This is going to be a one-off opportunity as it pans out. The hedgies just got their favourite weapon of mass destruction turned into a pop-gun. They won't be able to manipulate the market as easily now. While AAPL gets churned, the average investor and trader will finally be able to get into the stock during a period of consolidation, sell-offs, and rallies which will end up with the big guns no longer using AAPL as their proxy, nor the stock so vulnerable to rumours with less attention on it."

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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