How to Own Apple without Owning Apple

by Jay Pestrichelli on April 4th, 2012

I’ve had a few conversations recently with Buy and Hedge blog followers about how to own Apple. The main theme is that they feel like they are missing out on the incredible run this stock has been on, but are concerned that the price is too high.

As blog followers I remind them we already told them how to own Apple. At first there’s silence as if they were thinking, “wait…you did?” That’s when they realize that the indexes or ETFs we’ve blogged about already gave exposure to this juggernaut.

Whether it’sthrough the indexes of the S&P 500, SPX, or the Nasdaq 100, NDX, holders of those spreads have enjoyed the gains driven by Apple. I’ve heard the statistic that 13% of the growth of the S&P this quarter came from Apple. We haven’t done the math on it, but since Apple constitutes 4% of the S&P and has grown 50%, by simple multiplication, that seems about right to us. More directly, the NDX has a 17% weighting so the exposure there is even higher and gains in this index are even more attributable to Apple.

In addition, we like to look at some of the core holding ETFs. The SPY for example is getting the exposure just as the S&P 500 index is. Add to that, we’ve had technology ETFs like QQQ or XLK as one of our over-weighted sectors and this will also give exposure to Apple.

The benefit of having these diverse instruments is that you get to participate in the growth of Apple, although admittedly not as much, but still stay diversified and able to participate in the Apple “Ecology”. What we mean by that is a reference to all the other firms that benefit from Apple’s strong business model. Companies like Qualcom or Corning or Verizon that provide the services and components for the iphone or ipad for example are all rolled up in those ETFs.

So if you’re considering getting into Apple, but don’t want the stock itself, then consider QQQ or XLK as an alternative. As usual, we say be sure to hedge it and as all of these ETFs have very active options markets, it shouldn’t be hard to do

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