AXA Framlington’s Kelly slashes Apple weighting on margin fears

19 Feb 2013 | 15:07
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AXA Framlington American Growth managers Stephen Kelly and Dan Harlow have cut their position in Apple after growing concerned over margin pressures at the world’s largest tech firm.

The pair have moved from overweight to underweight on the stock within their £700m portfolio, reducing their holding from 7.6% to 4.5% of the fund following Apple's interim results in January.

After a high profile rise to become the world's largest company, Apple has fallen 35% from its September 2012 peak to trade at $460 a share today.

The most recent slide saw the stock shed 12% following a disappointing earnings report on 24 January. Harlow said those results raised concerns over Apple's bid to diversify its supply chain in an effort to ease competitive pressures.

"We cut our weighting in Apple following their earnings release in mid January. The company guided down in terms of gross margin, which was a disappointment to us. Our suspicion is it is incurring some pricing pressure from its component suppliers," said Harlow.

The pair view the recent pullback in Apple's share price as a pause rather than a plateau in its long-term growth story, however.

"It is a pause [in the growth story], but we need to see further evidence that the gross margin can stabilise at the very least. The underweight is also to do with the fact we see a lot of opportunities out there," Harlow added.

One of those opportunities is the Kansas City Southern Railroad company, which Harlow described as having a "real stronghold" on the cross border rail story. The pair may be more cautious on Apple but other US tech plays still feature heavily, with Amazon, Google and IBM among other top ten holdings.

AXA Framlington American Growth has returned 8.2% over the year to 8 February compared with an IMA North America sector average return of 12.5%, according to Morningstar.

Over five years, however, it has returned 58.7% compared with a sector average of 43.8%.

Categories: US

Topics: Axa framlingtonEquities

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