Periodically the Nasdaq-100 index, which is run by the Nasdaq OMX Group Inc, will be rebalanced to reflect a share weighting based on the market capitalisation of core (non-financial industry) companies listed there. Which, after all, is how that index is supposed to be configured.
This is outlined on the Nasdaq’s own site quite succinctly:
Nasdaq decided to enact a special rebalance in order to bring the weights of the index securities closer in line with their actual market capitalizations.
Unfortunately this rebalancing will mean that Apple’s share of the index will drop to around 12.33 percent from its current share of 20.49. In real terms Apple is still a hugely profitable company, with massive market growth, experiencing undeniable success with its iOS ecosystem (which includes the iPod touch, iPad, iPad 2 and iPhone), as well as the increasing growth of its OS X based workstations and portable Macintosh computers – partly driven by a “Halo” effect of Apple’s success with iOS devices.
For those of you that are interested this is a brief description of what the Nasdaq-100 is, from Wikipedia:
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies’ weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components. It does not contain financial companies, and includes companies incorporated outside the United States. Both of those factors differentiate it from the Dow Jones Industrial Average, and the exclusion of financial companies distinguishes it from the S&P 500 Index.
But this re-scaling is sure to cause volatility in trades in Apple’s shares (AAPL) in coming days, and has already caused a drop from just above $340 per share today to the mid to high $330s. Ironically Microsoft and Google have benefited in this re-indexing of the Nasdaq-100. The latter certainly being more deserving than the latter with its continued growth of its own mobile Android based eco-system. Where as Microsoft seems to be stalled in its attempts to grow both of its smartphone and search products.
On the flip side, most analysts are still listing AAPL as a $400+ share moving forwards. So frankly this period of uncertainty might be a good time to pick up some AAPL, if you haven’t already. And if you already have some I’d hang on to them.
The beginning of the end for Apple? Or more stock market shenanigans? Have your say in the comments…